Bank of England governor Mervyn King compared the UK's monetary policy arrangements favourably with those operating at the US Federal Reserve and the European Central Bank.
In his annual Mansion House speech to the City of London's great and good, King noted that the Fed and ECB have found it 'far from straightforward to convey the likely trajectory of future interest rates'.
Hmm. As I noted the other day, it does seem that the Fed has, in general, been pretty succesful in conveying the likely trajectory of future interest rates, certainly when judged by this criterion...
'Markets appear to have been rather successful in drawing conclusions because our decisions on interest rates have not, by and large, surprised them,' he added.
A number of Bank watchers had been expected a 6-2 vote in favour of unchanged rates, with the MPC gearing itself up for an August rate hike.
Still it's hard to argue with this point...
Financial markets have grown increasingly confused in recent months about when the Fed will bring its monetary tightening to a halt and at what speed the ECB intends to raise interest rates. Fed chairman Ben Bernanke, in particular, has faced widespread criticism for not conveying a clear message.
... and Mr. King is very clear about what he thinks works: An explicit objective and a window to how policymakers are assessing progress toward meeting those objectives.
'Knowledge of our objective and our analysis is all that markets need from us to form judgements about the future path of interest rates,' said King.
'Changes in our analysis, and the range of views within the Committee, may well affect the conclusions that financial markets draw about the likely path of interest rates,' he added.
The implication is that it would be so much easier to figure out what the Fed is up to these days if the FOMC was an inflation targeting institution. To that, I like this:
I think that being more explicit about our inflation objective could help us to be successful in maintaining price stability, but my expectations are modest.
... and I'm not so sure the Bank of England has been totally immune to the uncertainty bug:
Today's minutes to the June 8 MPC meeting diminished expectations that the central bank will raise the cost of borrowing in August by a quarter point to 4.75 pct. They showed that seven members voted for an unchanged base rate of 4.50 pct, with David Walton once again the only one voting for a hike.