My colleague Sandra Holdsworth often comes up with real gems in her observations of the market. This week she said “central bankers should do their market communication in a foreign language”. After mulling this over I think she has a point!
Way back in the 1950s it is fabled that Bank of England policy was made over a cup of tea and the raising of an eyebrow. Fast forward to 2013 and Mark Carney was very keen on providing clear forward guidance. Except that it hasn’t been very clear and arguably hasn’t worked very well. UK rates didn’t rise when unemployment zoomed through 7%. Brexit and the politics of “Project Fear” didn’t help the perception of clarity either. But it’s not just the Bank of England that has struggled to adopt the use of “plain English”.
The US Federal Reserve introduced “dot plots” in the early 2010s. The idea was to give a clear outlook to rates, except that actual Fed funds policy has moved nowhere near what they had been predicting. So when previous Federal reserve chairs Bernanke and Yellen failed to raise rates in line with what had been suggested, the Fed minutes became longer and longer. Policy misses need more explanation, or to put it more simply, if you don’t want to admit you are wrong best hide it through more words. In times past, previous Fed vice chair Alan Blinder referred to central bankers’ language, “Fedspeak”, as a “turgid dialect of English”.
Which returns us to Sandra’s point. Central bankers should be made to communicate not in their native tongue. One’s ability to obfuscate is greatly increased when one employs a carefully constructed rationale to reflect a course that is clearly collegiately predetermined yet which in fact has deviated from the desired outcome. See, no way could I have written that in French. Far easier to hide one’s true meaning in your own language.
Which of course is ironic. Despite having the most difficult job of corralling 19 disparate national central bankers, English is the lingua Franca of the European Central Bank. Doing “whatever it takes” is so much more easily spoken by an Italian in English. You’d never get an Anglo Saxon central banker talk “plain English” like that.