Lagarde - First lesson of central banking - Do not provide clarity

Lagarde:  We expect ECB interest rates to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within our projection horizon and until such convergence has been consistently reflected in underlying inflation dynamics

-      From ECB transcript

Simple language forward guidance: The ECB will continue current policy until core inflation reaches 2%.

This was Lagarde’s first press conference and there was the desire to not upset the markets and continue the status quo, but why should there be so much nervousness over a press conference? 

The press words are used to mute clarity and provide flexibility. Clarity associated with policy change is not desired. Some clarity of thinking that will help all market participants understand ECB monetary policy would be to define clearly these terms:

“robustly converge”

“sufficiently close to”

“projection horizon”

“consistently reflected”

“underlying inflation dynamics”

These undefined clarifying terms all lead to market uncertainty. Perhaps we get so used to the current ambiguity that we are immune to this uncertainty. What was said may make perfect sense, but would you make large investment decisions based on this current clarity? A change from the past for any central bank would be to say what you mean.