Talking More — But Saying Less — About Rates Looks Smart

It's the policy habit that's proving tough to kick. Despite easy caricatures of central bankers as cautious and dry folks, they have developed a tendency to overshare. Forecasts and deliberations, once the stuff of secrets, now fill the airwaves. Steering economies is as much about what you say as what you do. If ever there was a time to seriously question the wisdom of this philosophy, it's now.

While more information is generally better, the sheer volume of material thrown at the public can be overwhelming — and sometimes counterproductive. What's designed to inform also risks trapping officials when prices or employment develop in unexpected ways. Reserve Bank of Australia Governor Michele Bullock has found a way to avoid this pitfall: Talk more often but say as little as possible. “We’re not ruling anything in and we’re not ruling anything out,” she told reporters after the RBA's board meeting in March. “You’ll get sick of me saying that.”

At first glance, this line seems banal. Absent crisis, central bankers rarely do commit to anything in an unqualified manner. Looked at more closely, this safety-first doctrine appears prudent. Since taking the RBA helm in September, Bullock has seen the Federal Reserve flag interest-rate reductions only to find inflation's retreat stalling and hiring still robust. Fed officials have had to walk back some of that enthusiasm at the cost of upheaval in global markets. The European Central Bank has talked about easing in June, without a clear signal of what comes next. 

The RBA was long averse to the idea of a media briefing to accompany its formal statements. Officials held out as long as they could, to the point where the resistance began to look ridiculous. An independent review recommended some glasnost, and the RBA relented. So Bullock is a reluctant press-conference host. But what of the actual words, given that central bankers almost always leave themselves some escape clause? When she first used the not-ruling-in, not-ruling-out reference, it appeared she was trying to distance herself from her predecessor, Philip Lowe. Lowe became unpopular for the sharp rises in rates that began in 2022.

The rapid tightening was particularly awkward because Lowe projected during the peak of the pandemic that borrowing costs may not have to climb until 2024. There were qualifiers around his remarks, and other monetary chiefs said broadly similar things at around the same time. But nobody was interested in the caveats. In an economy where mortgage rates fluctuate with the official rate, Lowe was hung out to dry by politicians and denied a second term. His successor needed to become the anti-Lowe.

In case there is any doubt, Bullock insisted last month that she won't be giving forward guidance. “Our forecasts are inherently uncertain,” she said. “As we get more data and more information, if it confirms our forecasts then that will be good for us and we will be able to say ‘okay we’re on the right path.’ But if...it doesn’t look like the data is moving in our direction, then we have to consider how to move.”

Bullock's approach may have the added advantage of boring people. Given the RBA's dogged resistance to the idea of press conferences, officials might be pleased if people stop turning up. There have only been two, but already they have a kind of tedious feel to them. Bullock is keen to not leave a trail of comments that can come back to bite her. But not saying very much of anything means that if, and when, the next upheaval hits, hear-no-evil-see-no-evil will be a less tenable position. 

But in the short term, it has some advantages. For months, economists have predicted that the Australian economy will slow sufficiently to allow the RBA to cut rates this year. Recent reports have cast doubt on those projections. Inflation came in faster than expected in the first quarter and employment remains buoyant. Bullock is probably glad she hasn't committed to much of anything. There's nothing to walk back.

The governor has abandoned a tenet of monetary practice by jettisoning forward guidance. She might just get away with it — and look smart. 

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor for economics at Bloomberg News.

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