1 00:00:02,440 --> 00:00:10,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carol and 2 00:00:10,360 --> 00:00:12,880 Speaker 1: this is Here's Why, where we take one news story 3 00:00:12,920 --> 00:00:14,880 Speaker 1: and explain it in just a few minutes with our 4 00:00:14,920 --> 00:00:21,599 Speaker 1: experts here at Bloomberg. Central bankers are like celebrities in 5 00:00:21,640 --> 00:00:24,920 Speaker 1: the finance world. It's not just their actions, but every 6 00:00:25,079 --> 00:00:28,200 Speaker 1: word they say gets closely scrutinized. 7 00:00:28,600 --> 00:00:31,600 Speaker 2: The word transitory has different meanings to different people. I 8 00:00:31,640 --> 00:00:34,920 Speaker 2: think it's probably a good time to retire that word 9 00:00:34,920 --> 00:00:36,720 Speaker 2: and try to explain more clearly what we mean. 10 00:00:37,400 --> 00:00:42,239 Speaker 1: The ECB is ready to do whatever it takes to 11 00:00:42,400 --> 00:00:43,559 Speaker 1: preserve the Euro. 12 00:00:45,400 --> 00:00:48,760 Speaker 2: And Billie me it will be enough. We are not 13 00:00:49,000 --> 00:00:51,080 Speaker 2: here to close spreads. 14 00:00:51,360 --> 00:00:55,320 Speaker 1: This is not the function of the mission of the ECB. 15 00:00:56,640 --> 00:01:01,120 Speaker 1: Central Bank policy has far eating effects across economies and markets. 16 00:01:01,480 --> 00:01:04,160 Speaker 1: In a world of global investors, everyone's looking to be 17 00:01:04,200 --> 00:01:07,000 Speaker 1: first with any new information about what they're going to 18 00:01:07,080 --> 00:01:10,880 Speaker 1: do or not do next. So here's why we pay 19 00:01:11,000 --> 00:01:17,600 Speaker 1: so much attention to everything central bankers say. Under Opinion 20 00:01:17,640 --> 00:01:21,399 Speaker 1: columnist Daniel Mass joins me, now for more, Daniel, have 21 00:01:21,480 --> 00:01:25,440 Speaker 1: investors always been so obsessed with central bankers and everything 22 00:01:25,480 --> 00:01:26,199 Speaker 1: they have to say? 23 00:01:26,640 --> 00:01:31,200 Speaker 2: So when John Maynard Keynes was envisaging the post World 24 00:01:31,240 --> 00:01:37,080 Speaker 2: War II economic order. He foresaw a situation where central 25 00:01:37,160 --> 00:01:42,200 Speaker 2: banks were at the pinnacle of the globe's economic and 26 00:01:42,240 --> 00:01:46,440 Speaker 2: financial life. And here we are, eighty years on, we're 27 00:01:46,480 --> 00:01:50,680 Speaker 2: not far from that. People have always paid attention to 28 00:01:50,840 --> 00:01:55,800 Speaker 2: what they say. What's different in the contemporary era as 29 00:01:55,800 --> 00:02:00,800 Speaker 2: opposed to the eighties, seventies, sixties and so forth, is 30 00:02:01,240 --> 00:02:05,680 Speaker 2: the volume of words that are out there. I mean, 31 00:02:05,720 --> 00:02:10,640 Speaker 2: these are everyone's central banks. Now hard to envisage today. 32 00:02:10,840 --> 00:02:14,520 Speaker 2: But did you know up until nineteen ninety four the 33 00:02:14,560 --> 00:02:18,000 Speaker 2: Federal Reserve put out no announcement when it changed interest rates. 34 00:02:18,440 --> 00:02:22,240 Speaker 2: It was left to a small group of Fed watchers 35 00:02:22,280 --> 00:02:25,600 Speaker 2: on Wall Street to discern moves in short term money 36 00:02:25,639 --> 00:02:29,640 Speaker 2: mark and say, ah, looks like the Fed has tightened 37 00:02:30,240 --> 00:02:34,079 Speaker 2: or ease. Then there was a revolution. In early nineteen 38 00:02:34,160 --> 00:02:38,280 Speaker 2: ninety four, the FOMC published a two sentence press release 39 00:02:38,440 --> 00:02:40,600 Speaker 2: didn't even say what the level of the funds rate 40 00:02:40,720 --> 00:02:44,080 Speaker 2: was going to be. But as Alan Greenspan later wrote, 41 00:02:44,320 --> 00:02:48,160 Speaker 2: the intention was to bang a gong, and that set 42 00:02:48,280 --> 00:02:51,640 Speaker 2: in train a series of events which has led to 43 00:02:52,320 --> 00:02:56,800 Speaker 2: the era of relative central bank openness that we half. 44 00:02:56,880 --> 00:02:59,200 Speaker 2: So there's a lot to respond to, and markets are 45 00:02:59,200 --> 00:02:59,800 Speaker 2: so much. 46 00:02:59,600 --> 00:03:02,840 Speaker 1: Bigger, so we hear a lot more from central banker 47 00:03:03,000 --> 00:03:05,799 Speaker 1: is but how much do they actually tell us about 48 00:03:05,800 --> 00:03:08,400 Speaker 1: what they're going to do or what they have done? 49 00:03:08,560 --> 00:03:11,960 Speaker 2: Well, this is the signal versus the noise. I think 50 00:03:12,000 --> 00:03:16,079 Speaker 2: one of the challenges that people have is that there 51 00:03:16,080 --> 00:03:20,519 Speaker 2: are so many out there talking. They're not always saying 52 00:03:20,600 --> 00:03:25,640 Speaker 2: precisely the same thing. Some people are dissenters, some people 53 00:03:25,680 --> 00:03:28,320 Speaker 2: are looking to push the envelope in the other direction, 54 00:03:29,280 --> 00:03:34,080 Speaker 2: you know, And it is hard to discern who matters 55 00:03:34,280 --> 00:03:38,440 Speaker 2: at any one given point in the economic cycle. If 56 00:03:38,480 --> 00:03:41,360 Speaker 2: you're talking about the Federal Reserve, for instance, really it's 57 00:03:41,400 --> 00:03:45,200 Speaker 2: the troika that matters. That's not supposed to sound centice 58 00:03:45,240 --> 00:03:48,360 Speaker 2: that it merely refers to the FED Chair, the vice chair, 59 00:03:48,640 --> 00:03:51,600 Speaker 2: and the president of the New York Fed. The rest 60 00:03:51,680 --> 00:03:55,320 Speaker 2: can sometimes matter from time to time, depending on their expertise. 61 00:03:55,560 --> 00:03:59,520 Speaker 2: And the same thing broadly applies with other central banks. 62 00:04:00,240 --> 00:04:02,360 Speaker 2: Like if you're talking about the ECB, listen to the 63 00:04:02,440 --> 00:04:06,520 Speaker 2: chief economist, short, listen to the president, absolutely, listen to France, 64 00:04:06,640 --> 00:04:09,400 Speaker 2: Listen to Germany, listen to Italy. Some of the small 65 00:04:09,560 --> 00:04:11,760 Speaker 2: nations will they talk a lot. Do they really matter 66 00:04:11,880 --> 00:04:14,360 Speaker 2: behind closed doors? I mean, they all matter, but there 67 00:04:14,440 --> 00:04:18,400 Speaker 2: are degrees to this. So part of the problem is 68 00:04:18,480 --> 00:04:21,640 Speaker 2: just discerning who's doing the talking and who to listen to. 69 00:04:22,080 --> 00:04:25,640 Speaker 2: And it's sometimes not just what said, it's what is unsaid. 70 00:04:26,080 --> 00:04:29,200 Speaker 2: But look, what they say is important. It matters for 71 00:04:29,279 --> 00:04:32,479 Speaker 2: guiding expectations, you know. After he left the Fed, Ben 72 00:04:32,520 --> 00:04:36,240 Speaker 2: Bernanki wrote in a Brookings blog, the art of successful 73 00:04:36,320 --> 00:04:41,239 Speaker 2: monetary policy is ninety eight percent talk, two percent action. 74 00:04:41,760 --> 00:04:44,000 Speaker 1: Do they slip up? Do we ever get information that 75 00:04:44,080 --> 00:04:46,040 Speaker 1: rates out as didn't want to reveal that they sort 76 00:04:46,040 --> 00:04:47,200 Speaker 1: of latter out by accident? 77 00:04:48,080 --> 00:04:51,520 Speaker 2: Sometimes there are the little you know, if we were 78 00:04:51,560 --> 00:04:55,120 Speaker 2: writing a detective story, we were reviewing please lats, you know, 79 00:04:55,440 --> 00:04:58,839 Speaker 2: a Raymond Chandler novel, for instance, or some of the 80 00:04:58,839 --> 00:05:01,960 Speaker 2: books subsequently commission by his estate, which say it's that 81 00:05:02,000 --> 00:05:04,640 Speaker 2: little tell you're looking for, that little tell, that's something 82 00:05:04,640 --> 00:05:07,040 Speaker 2: that's just like a little bit out of the rhythm. 83 00:05:07,320 --> 00:05:10,119 Speaker 2: So there's misspeak, and then there are slip ups. Early 84 00:05:10,120 --> 00:05:12,919 Speaker 2: in his tenure, J. Powell slipped up when he said 85 00:05:13,080 --> 00:05:15,400 Speaker 2: to an interview or where a long way from neutral 86 00:05:15,440 --> 00:05:17,840 Speaker 2: people thought were criky. I mean is there a lot 87 00:05:17,880 --> 00:05:20,200 Speaker 2: more to come? That's not really what he meant to say. 88 00:05:20,600 --> 00:05:23,080 Speaker 2: So here's something that I like to refer to. So 89 00:05:23,160 --> 00:05:27,080 Speaker 2: everyone is familiar with Mario Draghi's whatever it takes line, 90 00:05:27,920 --> 00:05:32,760 Speaker 2: possibly the most celebrated phrase in twenty first century economic history. Okay, 91 00:05:33,160 --> 00:05:35,560 Speaker 2: but it's what he said after that, you know, that 92 00:05:35,839 --> 00:05:40,120 Speaker 2: got me really enthusiastic. And it was and believe me, 93 00:05:40,160 --> 00:05:43,559 Speaker 2: it will be enough. Yeah, what powerful words they turned 94 00:05:43,600 --> 00:05:44,039 Speaker 2: out to be. 95 00:05:44,480 --> 00:05:47,760 Speaker 1: You've been writing recently about why in this moment, whereasentra 96 00:05:47,880 --> 00:05:51,400 Speaker 1: banks are pivoting, it's even more important for them to 97 00:05:51,400 --> 00:05:52,919 Speaker 1: communicate clearly why. 98 00:05:53,560 --> 00:05:58,120 Speaker 2: Part of this is the ghost of transitory. So from 99 00:05:58,200 --> 00:06:02,560 Speaker 2: say late twenty twenty one through to the middle of 100 00:06:02,640 --> 00:06:07,400 Speaker 2: last year, we've had the most aggressive hiking cycle in 101 00:06:07,480 --> 00:06:10,640 Speaker 2: at least a generation, and given the low base from 102 00:06:10,680 --> 00:06:14,080 Speaker 2: where we started at the depth of the pandemic, probably ever, 103 00:06:14,480 --> 00:06:18,440 Speaker 2: or at least certainly in the modern era, because there 104 00:06:18,520 --> 00:06:23,480 Speaker 2: was so much egg on face after the transitory era. 105 00:06:23,560 --> 00:06:26,000 Speaker 2: And by the way, I'm not trying to pick on J. Powell, 106 00:06:26,320 --> 00:06:29,320 Speaker 2: a lot of central banks around the world, including in Asia, 107 00:06:29,480 --> 00:06:33,919 Speaker 2: used very similar words, but transitory seems to have captured 108 00:06:33,960 --> 00:06:37,839 Speaker 2: the zeitgeist. No one wants to be the person to 109 00:06:38,160 --> 00:06:43,560 Speaker 2: declare all clear and then have inflation go back up again, 110 00:06:44,240 --> 00:06:50,480 Speaker 2: potentially a career ending comment. So, particularly right now at 111 00:06:50,480 --> 00:06:55,120 Speaker 2: this inflection point, as the cycle gets underway, folks are 112 00:06:55,160 --> 00:06:59,080 Speaker 2: going to be very very cautious about how they're framing it. 113 00:06:59,080 --> 00:07:01,000 Speaker 2: It's almost like what excuse me, did you cut? 114 00:07:01,080 --> 00:07:03,279 Speaker 1: Or what plenty to watch out for? And making that 115 00:07:03,400 --> 00:07:06,679 Speaker 1: Jacksonville meeting all the more interesting. Bloomberg Opinion columnist Daniel 116 00:07:06,680 --> 00:07:08,360 Speaker 1: Mass thank you very much for joining us. You can 117 00:07:08,400 --> 00:07:10,920 Speaker 1: read Daniel's recent piece on this, Welcome to the Yes 118 00:07:11,160 --> 00:07:14,120 Speaker 1: Butt Cycle of rate cuts at Bloomberg dot com. Forward 119 00:07:14,120 --> 00:07:17,040 Speaker 1: slash Opinion for more explanations like this from our team 120 00:07:17,080 --> 00:07:19,840 Speaker 1: of twenty seven hundred journalists and analysts around the world. 121 00:07:19,960 --> 00:07:22,800 Speaker 1: Search for Quick Take on the Bloomberg website or Bloomberg 122 00:07:22,840 --> 00:07:27,640 Speaker 1: Business app. I'm Stephen Carol. This is Here's why. I'll 123 00:07:27,680 --> 00:07:29,880 Speaker 1: be back next week with more. Thanks for listening.