The View | Cacophony of mouths in US Fed should learn to shut up

The principle of collective responsibility is a key feature of the British Cabinet; the group of ministers that effectively act as the United Kingdom’s politburo. The principle has been developed over centuries as a way of ensuring that all members of the Cabinet support all collective decisions in public. If you want to be on the team you get behind the team decisions. If you don’t like it; go forth and multiply.

So it is becoming an increasingly unseemly occurrence for various governors of the US Federal Reserve Board to be competing for airtime about their views on the impending rise in interest rates. This is the single most important known event to impact financial markets in a year or two and it is rapidly descending into an omnishambles.

On Tuesday, Eric Rosengren, president of the Boston Fed and a known “dove”, came out saying that what was happening in China might delay the rise in interest rates.

The comments assisted a fall on Wall Street of nearly 3 per cent and Rosengren isn’t even a voting member of the Fed. Bill Dudley of New York, who is a voting member, had previously said rate rises were less likely because of the China slowdown. Then in a long-awaited speech at the Central Banker’s jamboree in Jackson Hole last weekend, Vice Chairman of the Fed and former dove, Stanley Fischer, said that overseas events were unlikely to impact the Fed’s decision.

Call me old-fashioned, but I cannot imagine this kind of ill-discipline happening under the leadership of the respected Paul Volcker, Alan Greenspan, or Ben Bernanke. Janet Yellen, Federal Reserve Board Chairman is increasingly giving the impression of being in charge but not in control. She didn’t even bother to join the Jackson Hole policy wonk-fest.

One day we get good economic figures out of the US and the market thinks rates are going up. The next minute markets get spooked about China’s hard landing and the message from the Fed is irresponsibly mixed. So it is not surprising that the VIX index of volatility is at its highest in four years. These most intelligent people, intimately determining a great issue of our age, are playing parish-pump politics in front of the microphones like second-tier Presidential candidates.

The markets want a single clear decision not a chorus. It is bad enough figuring out the impact of a rise in interest rates without having a chorus of dissent from the policymakers themselves.