Central bank communication - is there too much?

The courts had to force the Fed to reveal the list of borrowers from the discount window. The information showed foreign banks as the largest users of the Fed facility. Th information was embarrassing that fact that Fed had to be forced to provide the information as not a shining moment of transparency. However, the financial world did not stop and the truth did not cause a massive sell-off for financial institutions. Central bank communication is good.

However, too much central bank information can also be a problem. Fed Chairman Bernanke is planning to hold a regular press conference starting at the end of April. While this should be informative, it creates a new set of problems. Markets will be focusing on the verbal communication of the Fed and not the actual fundamentals numbers. Communication can be subject to nuance and subtlety. It can be ambiguous on a turn on phrases. Do you believe the words from the central bank or the actual money flows? Academic research already shows that the market will jump on communication changes. Should the market be surprised by Fed announcements?

Communication can best come through consistent, stable and clear policy actions. If this is done, there may not be a strong need for the speeches and press conference.

This reminds me of the My Fair Lady song, Show Me,


Never do I ever want
to hear another word.
There isn't one
I haven't heard.
Here we are together
in what ought to be a dream;
Say one more word and
I'll scream!


Sing me no song!
Read me no rhyme!
Don't waste my time,
Show me!


Please don't implore
Beg on the seats
Don't make all the speech
Show me!