Central Bankers Need to Dial Down Their Rhetoric

The recent firehose of opinions spilling forth from officials at the Federal Reserve, European Central Bank and Bank of England has been as unedifying as it is unhelpful. Given the febrile state of financial markets and the collective failure of the economic community to clear even its own low bar when it comes to pretending to see the future, policymakers would be advised to pipe down.

Following the post-pandemic surge in inflation, there’s been a collective consensus to move away from explicit forward guidance on monetary policy, replaced by a meeting-by-meeting data-dependent outlook. That’s a practical approach to a highly uncertain economic backdrop, and is to be welcomed. But it is falling apart, and is having the unwelcome side-effect of making fixed-income markets more volatile (albeit exacerbated in recent days after the collapse of Silicon Valley Bank), something policymakers should know to avoid.