Central banks from India to Turkey and Brazil these days seem to completely have lost track of their objectives – jumping from one objective (inflation targeting) to another (exchange rate targeting) and back. Confusion rules.

Maybe they should take a bit of advice from Mike Belongia. This is Mike in a piece from Public Choice in 2007:

“Transparency,” as it applies to the conduct of monetary policy in the United States, appears to be like pornography in the sense that it defies objective definition. In general, however, a transparent framework would include at least these elements: A well-defined statement of monetary policy’s goals, the enunciation of an economic model by which the central bank’s ultimate goal variable(s) is determined and the announcement of which policy levers (instruments) the Federal Reserve has chosen to manipulate in its pursuit of a policy objective(s). With an understanding of these three components of monetary policy, it can be argued, the public would have a clear idea of what the Fed is trying to accomplish and how it intends to achieve the goal(s) it has identified. In the absence of information about any of these of three components of monetary policy, however, the Fed becomes less a policy institution that serves the public and more like a Wizard of Oz figure who operates behind a curtain of secrecy and asks the public to trust it with blind optimism.

It is not more complicated than that. Unfortunately 7 years later the Fed has still not really defined its policy objective or its policy instrument and I am beginning to doubt that the central banks of India, Turkey and Brazil even know what they are trying to achieve with the use of multiple odd instruments. It is depressing…