Mark Carney’s first Treasury Select Committee hearing earlier this year was remarkable for one thing: his obsession with communication. The success of the Bank of Canada’s so-called ‘contingent commitment’ was taken up with aplomb by the Fed, and now Carney brings it to the BoE with ‘forward guidance’. Even the ECB want to join the party.
They should be wary. Last night’s Fed statement has been pored over for exactly what the inflation/unemployment targets mean – does disinflation dominate? How more dovish is “modest” than “moderate”? We might know that Esther George is less dovish than James Bullard, but what does dovish even mean these days? Taper later:? Taper then reverse? Butcher, baker, candlestick maker? We’ve gone from gnomic Greenspan to verbal diarrhoea Bernanke, and are none the wiser.
The trouble in this information age is that the more we read, the more confused we become. Instead of stepping back and trusting our judgement, we dive in further in a desperate bid to find the silver bullet of a detail.
It’s time to stop listening to the central bankers, and take a view on the data. I know, it’s tough to believe the world might be recovering. But it is. Sure, it’s not going in a straight line, but even European growth is picking up (check out those PMIs). As Frankie says, Relax.