, Columnist
How We Got Hooked on Central Banks' Guidance
There's a good chance that officials will follow the economic data. So ... don't ignore the economic data.
Stephen Poloz didn't mean to startle you.
Photographer: Photographer: Patrick Doyle/BloombergThis article is for subscribers only.
Economists have become far too dependent on the drip feed of communication from central banks. Recent events on both sides of the Atlantic show the risks.
Private-sector economists and investors may have become so used to overt guidance on when interest rates will rise -- and when they won't -- that they underestimate economic data that might otherwise scream for higher borrowing costs. For policy makers, this has costs too: A verbal miscue or a failure to follow through on guidance can mean not everyone gets the message when it really matters. Central banks aim to be a predictable, steady hand guiding economic growth.