Central bankers can do a lot better than talk to us
Keeping ‘emergency measures’ in place for a decade means that central banks have become a big part of market uncertainty
At a conference in Frankfurt organised on November 14, the heads of the US Federal Reserve, the Bank of England (BoE), the European Central Bank (ECB) and the Bank of Japan (BoJ) expressed views on the conduct of monetary policy, but did not provide markets with clues on future policy. Instead, the discussion dealt with the way messages would be transmitted to the markets. Markets and investors will be better served if monetary officials spend less time providing guidance on their next steps, and more time devising and following pre-announced rules for the implementation of policy. By staying for a decade with what then-Fed chairman Ben Bernanke referred to in 2008 as short-term "emergency measures", the central banks have themselves become a big part of the uncertainty that investors have to take into account. How did the central banks put themselves in this situation? After initially responding to the global financial crisis with the traditional tool of lower interest rates, all f...
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