Central Bankers: Financial markets hang on their every word.
Speeches are parsed and pored over to gain the smallest clue as to where policy may be headed.
And if we’re close to a peak in interest rates, with an extended period of little change ahead of us, what Central Bankers say may matter more, than what they do.
Now to be fair, many Central Bankers are not best known for their outstanding communication skills.
It was Alan Greenspan who, when running the US Federal Reserve, famously said “I know you think you understand what you thought I said, but I’m not sure you realize that what you heard is not what I meant”
So the standard has been set.
Now how do we in Ireland and Europe fare as regards Central Bankers’ clarity of communication.
Christine Lagarde obviously has to be careful and cautious in the language she uses as she is dealing in an uncertain world with issues that investors, consumers, savers, borrowers and many more are desperate for certainty.
And she is.
It is clear from looking through Lagarde’s speeches, that you’ll gain significant insight into monetary policy –
– but by Jesus you’ll get an education as well!
Not for Christine is the arid Central Bank language of yield curves and liquidity traps .
Her landscape of monetary policy is a rich tapestry of, amongst others, European philosophers, acclaimed novelists, Greek explorers – oh and the Head of the Catholic Church.
Take the annual meeting of the world’s central bankers in Wyoming this year. While the head of the US Central Bank was enthralling his audience with PCE and GDP; Christine Lagarde was introducing her audience to the works of Soren Kierkegaard, the Danish philosopher. She explained that one of the key problems for Central Bankers was summed up by Kierkegaard – “life can only be understood backwards but must be lived forward” – perhaps his version of data dependent!
European philosophy seems to loom large in the Lagarde lexicon.
In her September speech, up pops Ludwig Wittgenstein, Austrian born philosopher, who no doubt referring to Central Bankers, said “the limits of my language mean the limits of my world”. Hard to imagine Greenspan admitting to such shortcomings.
And it’s not only philosophers, Christine Lagarde expects us to be well and widely read. Earlier in the Summer she pointed us to acclaimed novelist Graham Greene, as a guide to the hard work that goes into interest rate decisions, when he said “a feat of daring can alter the whole conception of what is possible.” Echoes of Mario Draghi’s “Big Bazooka”?
American author Helen Keller also was promoted by Lagarde this Summer. She offered Keller’s words of “our worst foes are not belligerent circumstances, but wavering spirits”. I think this was aimed at preparing her audience for “higher for longer interest rates” and the need to be patient and strong. At least I think that’s what she meant!
But it’s clear we have a Central Bank leader with interests in more than just supply side constraints. In fact, Lagarde’s ambit extends beyond the philosophical giants and great literature, she also cares for our spiritual welfare . Pope Francis and his encyclical, Laudato Si, feature in her most recent speech.
The true measure of her influence will perhaps only be seen if Christine Lagarde features in a papal encyclical!
Tradewinds 