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Top central bank chiefs talk up guidance role

A rare meeting of some of the world’s most important central banks chiefs from Britain, Japan, Europe and the US takes place in Frankfurt. As David Pollard reports, many suspect they’ll discuss how best to start removing stimulus.

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Communicating the complexities of monetary policy can be a challenge …

(SOUNDBITE) (English) BANK OF JAPAN GOVERNOR, HARUHIKO KURODA, SAYING:

“Inflation expectations are formed not only by the forward looking way but also backward looking way.”
But these central bank chiefs at a communications conference in Frankfurt have one communication channel they see as vital ….
As they begin to withdraw the huge monetary stimulus rolled out during the financial crisis.

(SOUNDBITE) (English) ECB PRESIDENT MARIO DRAGHI, SAYING:

“Forward guidance has now become a fully fledged monetary policy instrument like anything else.”
But if talk is cheap – it’s not always so if you’re a central banker.
In 2014, a UK lawmaker labelled Mark Carney an ‘unreliable boyfriend’ for the mismatch between his guidance and real events.
The US Fed sparked the massive, bond-market sell off of the 2013 ‘taper tantrum’ when it got it wrong.

(SOUNDBITE) (English) OUTGOING FEDERAL RESERVE CHAIRMAN, JANET YELLEN, SAYING:

“Almost all guidance should be conditional and related to the outlook for the economy. Obviously there is inherent uncertainty …..”
Uncertainty which economists see playing out in a recent flattening of the US yield curve ….

SOUNDBITE (English) SENIOR FX…

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