The yoghurt consumption habits of central bankers have rarely attracted much public attention. But two pots of the fermented milk product purchased by Mark Carney, the Bank of England’s governor, have become the latest symbol of central banks’ commitment to openness and accountability.
The yoghurt consumption habits of central bankers have rarely attracted much public attention. But two pots of the fermented milk product purchased by Mark Carney, the Bank of England’s governor, have become the latest symbol of central banks’ commitment to openness and accountability.
Mr Carney bought his £7.90 yoghurts in a lounge at Heathrow airport in 2015. The purchase came to light when the BoE released details of the expenses on his credit card - including a meal in Washington DC revealing, shockingly, that Mr Carney or his dining companion drank Diet Coke with paella.
The BoE’s initiative is part of a commendable move towards transparency across many central banks, and one that has seen rather more substantive changes than revelations of dairy consumption and ill-judged food and beverage-matching decisions. However, in some of these areas, such as policymakers’ private meetings with participants in the financial markets, they could do more to reassure the public that the transparency is reaching as far as it can practicably go.
For an organisation like the Bank of England, openness has not come naturally. It did not become a public body until 1946, more than 250 years since it was created, and gained the independence to set interest rates only in 1997. The prevailing attitude to publicity was to “keep the Bank out of the press, and the press out of the Bank”. The BoE secured an exemption from freedom of information requests on policy matters, and its Monetary Policy Committee maintained the right to destroy tapes taken of its meetings.
It was soon clear that the BoE had entered a new world. Little more than a year after independence, the nine members of the MPC were a little taken aback to find details of their own mortgages and the value of their homes in the Sun tabloid, headlined: “Why Should We Worry If Mortgages Go Up?”
Without necessarily releasing details of its officials’ housing arrangements, the BoE has made more substantive moves towards transparency. MPC decisions on interest rates are accompanied by a simultaneous breakdown of the votes by each individual member and the reasons for them.
A large economics literature has grown up about the optimal degree of transparency in monetary policy, including publishing inflation and growth forecasts to guide expectations, or indeed giving more explicit “forward guidance” about what conditions are likely to lead to interest rates being changed.
Yet it is the personal conduct of policymakers and treatment of confidential information where some more controversial issues reside, particularly given how close central bankers are to financial market participants.
Jeffrey Lacker, president of the Richmond Federal Reserve, recently resigned after it was revealed he was involved in an alleged leak of confidential information in 2012 to a reporteranalyst for Medley Global Advisors, a policy intelligence firm owned by the Financial Times. The diaries of European Central Bank officials from two years ago, obtained under freedom of information rules, showed that they met bankers and asset managers just days or hours before policy decisions. The ECB had already launched its own review of contacts between officials and the private sector.
Remarkable though it may seem, there are bigger issues at stake than Mr Carney’s yoghurts. Central banks have come a long way in using transparency as a tool in setting monetary policy. They must also ensure that the personal conduct of their senior officials is beyond reproach.
