It s not officially in their mandates, but central bankers don t like to surprise the market.
The idea is that predictability will make their policy more effective for the end users of interest rates: consumers and businesses. It's why the Federal Reserve has press conferences, dot plots and economic projections compared to decades earlier when it didn't announce its interest-rate decisions.
The Federal Reserve Chair Jerome Powell made his latest monetary policy decision in a way that his international counterparts did not. Bond yields TMUBMUSD 02 Y moved little as the Fed announced a taper and Powell explained the rationale for its actions.
Andrew Bailey was compared to his predecessor, Mark Carney, who earned the unreliable boyfriend reputation for saying markets he would do something and not following through. Bailey led financial markets to assume an interest rate increase so much that a 100% probability of a increase was priced in to key futures contracts.
The Bank of England decided to keep interest rates steady at a record low of 0.1% when it decided to keep interest rates at a record low of 0.1%.
A risk is that the new governor inherits this moniker after his public statements ahead of today s announcement, said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors. After taking time to seemingly warn markets about potential lift off, it may be a bit perplexing for many that the Bank chooses to push against markets that had priced in a steeper path for interest rates. It is not sure that December increase is coming, markets aren't sure. While our base case remains for a December hike, the decision could go either way with the first increase possibly delayed until February, said Kallum Pickering, a senior economist at Berenberg, who correctly predicted the Bank of England would not increase rates in November.
Financial markets were caught out by the Reserve Bank of Australia, which initially decided not to defend a yield curve control policy on its 3 year bond TMBMKAU - 03 Y and then insisted that it wouldn't increase interest rates until 2024.
Christine Lagarde, president of the European Central Bank, seemingly sends herself out to correct her own mistake in not, at her post-decision press conference, fighting hard against market expectations for rising interest rates. A speech that she did not employ at the end of October was called an interest-rate increase in 2022, but was very unlikely, which was a phrase she did not employ at the end of October.
The Fed Chair Powell and his colleagues have succeeded in threading the needle, at least at least, at the November FOMC meeting, said Krishna Guha, vice chairman of Evercore ISI.