Milton Friedman, in one of his final interviews, suggested that monetary policy should be run by a computer. Since the future is uncertain, any interest rate mechanism will make wrong decisions. But humans add another flaw. Monetary policy requires managing expectations of future inflation and interest rates. Policymakers must be able to communicate effectively. Ben Bernanke’s initial difficulties and the Bank of England’s current woes reflect this challenge. The problem is not policymakers’ views but rather that few can understand what those views actually are.

Sweden’s Riksbank, the world’s oldest central bank, has just joined a small group of institutions with a no-nonsense solution: policymakers publish a forecast of where they expect to set interest rates in the future. This is not as radical as it sounds. If they are competent, they should have a view. And it forms another step towards transparency. Europe’s central banks once made inflation forecasts on the assumption of constant interest rates – a pretty silly premise. Now the European Central Bank and BoE assume a more realistic market yield curve. But they expend an inordinate amount of energy hinting at how plausible they believe that curve is. Far better just to say, explicitly, what they think.