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Communication with the public and financial markets is a vital element of a modern central banker’s role.
“The days when ‘constructive ambiguity’ was seen as a helpful foil for central bankers are behind us,” Minouche Shafik, the Bank of England’s deputy governor for markets, declared in February. “Governors’ eyebrows and fireside chats are no match for a clearly communicated framework in which information will be gathered and decisions made.”
To add some scientific heft to the debate, the Financial Times commissioned Tola Adesina, a finance specialist from Coventry University, to undertake a textual analysis of Mr Carney’s speeches and press conferences.
Mr Adesina’s research concentrates on the communication of central bankers. The analysis involves assessing speeches and off-the-cuff remarks for ease of readability.
The first result that emerges from the data suggests that his speeches since arriving at the BoE are significantly clearer than those he delivered as governor of the Bank of Canada.
Whether it was his own drafting or that of BoE staff, “there seemed a conscious effort to make himself more understandable upon his arrival in England”, said Mr Adesina. His Canadian speeches averaged 22 words a sentence compared with 17 since joining the BoE.
Journalists regularly complain that Mr Carney is difficult to quote since he rarely finishes sentences. They compare their problems with the ease of quoting Mervyn King, his predecessor, who had a reputation for speaking in fully formed paragraphs.
Mr Adesina has compared the 10 inflation report press conferences Mr Carney has given with Lord King’s last 10 before retirement. The scores were very similar, with both men speaking in language and style classed as “difficult” — requiring at least 11 years of formal education to understand.
But some of the complaints may have a scientific underpinning. “Over time, Mark Carney’s statements show signs of becoming more difficult to understand,” said Mr Adesina.
The Canadian uses many fewer words than Lord King did in press conferences, and the evidence suggests the former governor’s statements “became easier to understand as he eased himself into retirement”.
With such inconclusive results, the arguments over communications will rage on. Some academics express sympathy over the pressure this puts on central bankers.
Michael McMahon, an economist from the University of Warwick, said: “Anything said by policymakers is scrutinised for meaning that may not be there, and as a result central banks feel they need to scrutinise each word, meaning that markets are right to scrutinise, knowing everything has been drafted within an inch of its life.”