Opinion: Bank governor Carney aced ‘forward guidance.’ Not PM Carney |
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Opinion: Bank governor Carney aced ‘forward guidance.’ Not PM Carney
The key to good guidance is to be clear in what you promise and then follow through on it. Mark Carney is failing at both
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As Bank of Canada governor during and following the financial crisis of the 2000s, Mark Carney helped perfect the now-common central banking tactic of “forward guidance” — essentially telling people what you plan to do in given circumstances. To be effective, forward guidance needs to be clear, concise and credible. Markets and the public must believe you will act as you say. But if government actions are not consistent with the guidance, that creates policy uncertainty and market unpredictability. In short, forward guidance places a high premium on consistent follow-through.
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