When TMI Costs Central Bankers Their Jobs

One of the most significant shifts in global economic policy over the past two decades has been the ascent of language. Central banks have strived to tell the public the likely path for interest rates — sometimes years in advance. It worked as long as inflation behaved itself. The man steering an iconic economy discovered to his detriment that the process can go badly wrong.

Flawed forward guidance, more than anything else, has cost Reserve Bank of Australia Governor Philip Lowe the second term he desired and that his two immediate predecessors were granted without hesitation. Turns out all that monetary talk can have a big and, until now, seldom mentioned downside. If the path of borrowing costs that’s conveyed turns out to be wide of the mark, it can cost monetary chiefs their jobs.