Thursday, July 4, 2013

Why Central Bank Governors should not try to be Comedians


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Reserve Bank governor Glenn Stevens was attempting a dry joke at lunchtime on Wednesday when he told an economists' conference in Brisbane that the central bank's board had deliberated for ''a very long time'' on Tuesday to come up with a decision to do nothing with its cash rate.

But when the Bloomberg business news service sent a flash to its clients that ''Stevens says Board deliberated for a Very Long Time Y'Day'', his off-the-cuff comment took on a life of its own.

The Australian dollar slumped by almost three-quarters of a US cent within minutes to fresh three-year lows of about US91¢, and fell further as word filtered out that Stevens had not intended to give everyone a steer about future cash rate decisions. Late in the afternoon it was trading at about US90.6¢, US1¢ down.

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