So much for the era of central bank clarity. That went by quickly. Today, it looks like we will be returning to a Greenspan-like era of riddles, double-speak and meaningless gobbledygook. Fed utterances will once again require “parsing” by “Fed experts” as central-bank chiefs return to “telegraphing” their intentions to a mystified media.
The world’s major central banks are returning to a more opaque and artful approach to policymaking, ending a crisis-era experiment with explicit promises that they found risked their credibility and did not substitute for action.
From Washington to London to Tokyo, the global shift from transparency to flexibility underscores the challenges central bankers face as they test the limits of what monetary policy can achieve.
The return to a more traditional policymaking approach and nuanced statements will challenge the communication skills of central bankers who have been chastened in the last year after some too-specific messages confused and disrupted financial markets.
Oh yes, we’re quite sure that speaking in riddles, and divulging little in the way of actual information will prove highly challenging to autocrats operating behind the curtain. We would hate for the free flow of information to disrupt these “free markets”.
In sympathy to our unelected world-leaders, we do concede that it is hard to do one thing after you’ve promised to do another. Who can forget when Bernanke famously blabbed to Maria Bartiromo at a cocktail party that he hadn’t actually meant what he said in front of Congress? It’s getting much harder to be duplicitous these days. Greenspan had the secret sauce indeed.
Our favorite part of the original quote is this little gem:
“the global shift from transparency to flexibility”
By “flexibility” we suppose they mean the ease by which non-democratic institutions can dictate policy unfettered by the public’s watchful eye? Oh yeah, that kind of flexibility. Dictators enjoy it too.
“Central banking used to be an art,” said a senior official of a G7 central bank. “It became less so once, globally, but with what’s happened at the Fed and the BoE, it may be back to being an art.”
As they say, art is subjective. On the bright side, this new era of non-Glastnost among our central-planners should positively affect employment-rates by requiring a few more “Fed Experts” over at CNBC — who will of course “parse” whatever Yellen says as being good for a few more handles on the S&P.