Mark Carney is gambling with his credibility

Risky, risky, risky.

In a dramatic break with history, at his first meeting as Governor,  Mark Carney persuaded the Bank of England’s, (BOE), Monetary Policy Committee, (MPC), to issue what amounted to forward guidance on the path of future monetary policy.

The key sentence in the statement issued by the MPC was, "The, (recently observed), significant upward movement in market interest rates, would, however, weigh on that outlook; in the Committee’s view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy".

There are arguments against, and arguments in favour of forward guidance. Against the guidance ties the committee’s hands and will make it look stupid if it subsequently has to adapt it too quickly, (almost by definition), and if it does have to change the message, that’s going to lead to ever-diminishing credibility for future guidance, i.e. the market will remember the committee’s ‘mistakes’ and not believe future guidance.

For: it represents "costless" intervention, in the narrow sense that the central bank doesn’t have to actually DO anything right now and, if the guidance does have to change direction later, then that will probably be because the initial guidance has done its work - having lead to the desired economic adjustment.

The substance of today’s messages from both the BOE and the European Central Bank, (ECB), which used a similar tactic, was that they had seen their yield curves steepen dramatically since the market became obsessed with "tapering" in the US-the process by which the Fed may wind down its programme of Quantitative Easing, and that they could neither understand this phenomenon nor stand idly by and watch it happen. To paraphrase their message- "never mind the US, or the Fed, look at our economies and ask yourself, why would you expect us to raise rates any sooner now than you did two months ago". Fair enough and, in the ECB’s case, a very good point.

However, I think Carney has started his encumbency with a very risky gamble. Whilst the Eurozone economy has been flatlining and boasts economies best described as ranging from zombie to plunging, the UK economic data has recently given us some distinctly pleasant surprises - the latest being the Services Purchasing Managers’ Index-representing a massive sector of the economy- and quite a robust housing market recovery. Let us also not forget that UK inflation remains stubbornly high and shows no real tendency to fall. Maybe not today, maybe not tomorrow, but probably by Christmas, I think the BOE will have to subtly change today’s attempt at guidance and investors who bought gilts on the back of today’s BOE statement may come to regret that before long.

Bank of England Governor, Mark Carney. Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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Want your team to succeed? Try taking a step back

From the boardroom to the sports ground, managers need to step back for creativity to thrive.

Everyone is in favour of creativity, usually at the expense of creative people. The concept is in perpetual boom. Give us creative midfielders, creative leadership, creative solutions, creative energy. It’s with the “how” that the problems start – with extra meetings and meddling, over-analysis and prescriptiveness, whiteboards and flow charts. Professional systems rarely support the creativity that they allegedly seek. The creativity industry system is at odds with its stated goals.

The novel was an early casualty. Nothing makes me close a book more quickly and finally than the creeping realisation that the author is following a narrative map purchased on an American creative writing course. Life is too short for competent novels. The creativity industry pulls up the worst while dragging down the best.

Something similar happens inside professional sport, even though creativity is so obviously linked to performance and profit. Yet sport, especially English sport, has suffered from excessive managerialism. Perhaps guilt about English sport’s amateur legacy gave “professionalism” free rein, however pedestrian its form.

Here is sport’s problem with creativity: professional systems crave control, but creativity relies on escaping control. If an attacking player doesn’t know what he is going to do next, what chance does the defender have?

So when truly unexpected moments do happen, they take on a special lustre. This month, Olivier Giroud scored an unforgettable goal for Arsenal. Bearing down on the goal, he was already launched in mid-air when he realised that the cross was well behind him. With his body far ahead of his feet, Giroud clipped the ball to the top corner of the net with the outside of his left ankle – a so-called scorpion kick.

It was, in retrospect, the only option available to him. Football, for a moment, touched the arts – not only beautiful, but also complete. Nothing could have been added or taken away.

I once tried to compare the perfect cricket shot to Robert Frost’s celebrated description of writing a poem: “It begins in delight, it inclines to the impulse, it assumes direction with the first line laid down, it runs a course of lucky events, and ends in a clarification . . . Like a piece of ice on a hot stove the poem must ride on its own melting.”

A great goal, however, fits that poetic model better than a cricket shot. Cricket shots come in many aesthetic grades, but they are all intended as shots. A goal, on the other hand, is more than just a very good pass, only better. There is an act of transformation within the event.

Frost’s acknowledgment of luck (distinct here from fluke) neatly defuses the accusation. Saying that a great goal involved luck does not to diminish it. Many unearned factors must interact with the skill.

“But did he mean it?” some people have wondered about Giroud’s goal. That isn’t the point, either. There wasn’t time. Giroud had solved the problem – to make contact with the ball, however possible, directing it towards the goal – before he was fully conscious of it. That doesn’t make it an accident. The expertise of a striker, like that of a writer, is opportunistic. He puts himself in positions where his skills can become productive. It is a honed ability to be instinctive. “If I’d thought about it, I never would have done it,” as Bob Dylan sings on “Up to Me”, an out-take from Blood on the Tracks.

Pseudo-intellectual? Quite the reverse. There is nothing pretentious about recognising and protecting creativity in sport. Over-literal decoding is the greater threat: instinctive performance needs to be saved from team meetings, not from intellectuals.

Having described a creative goal as unplanned – indeed, impossible to plan – what can coaches do to help? They can get out of the way, that’s a good start. It is no coincidence that the teams of Arsène Wenger, who is sometimes criticised for being insufficiently prescriptive, score more than their fair share of wonder goals.

The opposite arrangement is bleak. A friend of mine, a fly-half in professional rugby union, retired from the game when his coaches told him exactly which decisions to make in the first six phases of every attacking move. In effect, they banned him from playing creatively; they wanted rugby by numbers.

Not everything can be rehearsed. One useful book for coaches scarcely mentions sport – Inside Conducting, by the conductor Christopher Seaman. “I’ve never had much sympathy for conductors who ‘program’ an orchestra at rehearsal,” Seaman writes, “and then just run the program during the performance. There is much more
to it than that.”

Dan Vettori, the rising star among cricket’s Twenty20 coaches, is rare for having the bravery to echo Seaman’s theory. He believes that cricketers are more likely to play well when they feel slightly underprepared. It’s a risk and a fine balance – but worth it.

As I explored here last month in the context of Daniel Kahneman and Amos Tversky, there is a danger of slotting players into false stereotypes and classifications. Giroud, for example, is slow. Slow yet athletic. That’s an unusual combination and partly explains why he is underrated.

We often think of pace as the central and definitive aspect of athleticism. But speed is just one component of total athletic ability (leave to one side footballing skill). Giroud has an outstanding vertical jump, power and great balance. Because he is big and slow, those athletic gifts are harder to spot.

Management systems overestimate both labels and top-down tactics. A braver policy, pragmatic as well as aesthetic, is to be less controlling: allow opportunity to collide with skill, directed by an open, expert and uncluttered mind. l

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 12 January 2017 issue of the New Statesman, Putin's revenge