Top central bankers align on rewriting the policy playbook

Central bankers from the world's leading democracies are rewriting how they communicate about monetary policy. At the European Central Bank's annual conference in Portugal today, the heads of the Federal Reserve, European Central Bank, Bank of England, and Bank of Canada found striking alignment: they should talk less about where policy is heading. Federal Reserve chair Kevin Warsh, who has long criticized what's called "forward guidance"—explicitly laying out future policy moves—found allies on stage. ECB president Christine Lagarde said she regrets feeling bound and compelled by forward guidance. Bank of England governor Andrew Bailey agreed, noting that forward guidance is easy to put in place but hard to undo. The shift reflects a rare moment. According to Warsh, they've been burdened by policies from the two-thousand-eight financial crisis and now have a chance to return to first principles. The Federal Reserve will establish task forces to study the new approach, with findings expected by year-end.

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