Central bankers grew so accustomed to being front-page news during the global financial crisis and its aftermath that it must come as an adjustment to suddenly be relegated to the back pages.
Mark Carney, Governor of the Bank of England, says he views it as a positive development. “In many respects, we’re coming to the last seconds of central bankers’ 15 minutes of fame, to use the Warhol line, which is a good thing,” Carney said during his press conference on Thursday that followed the Bank of England’s policy decision.
“It’s a more balanced policy mix. Also, structural policy is becoming more important, trade policy clearly important here and elsewhere.”
However, the former Goldman Sachs partner’s reading of the situation may be too optimistic. After all, the reason the Bank of England, and the U.S. Federal Reserve, have suddenly become less relevant is that both are facing levels of political turmoil and uncertainty not seen in decades.
In the UK, a slow, halting Brexit process is pushing up inflation and depressing investment, which is why policymakers decided to leave interest rates on hold Thursday.
Stateside, the first two weeks of Donald Trump’s presidency have been a whirlwind of rolling mini-crises that threaten to become bigger problems down the line, most recently an unusual diplomatic spat with ally and trading partner Australia. This is on top with ongoing beef with Mexico, China, Iran, and others.
Making interest rate policy boring again would be wonderful if the US and the UK had suddenly embarked on constructive debates about better ways to use fiscal policy or other major economic initiatives. But that’s just not what’s happening.
On the upside, the turmoil simplifies the Fed’s decision-making — why raise interest rates when the Trump uncertainty factor so overwhelmingly clouds the outlook.