Moving over hawks/doves/owls, central bankers should be more like foxes…

There is this interesting discussion on whether someone should be a hedgehog (knows one thing really well) or a fox (knows several things).

In this speech Olis Rehn, head of Finland Central Bank says central bankers should move away from being hedgehogs (price stability) to being foxes (knowing several things):

Central bankers are often labelled as either hawks or doves. I don’t see this as a very useful classification. It is almost a caricature of one-eyed dogmatism, not fitting to any serious central banker that I know of.

Instead, a more relevant distinction was made by the philosopher Isaiah Berlin, who divided policymakers to foxes and hedgehogs: “the fox knows many things and the hedgehog knows one big thing”.  

In monetary policy, pursuing the price stability objective with long-term consistency and resolve calls for the central banker to develop a personality of the hedgehog.

But monetary policy is not a mechanical exercise that can be done in a social vacuum. A strategic sense of the interplay between the economy and politics, the markets and the media is also essential – knowing when to play offensive, when to hold on to defence, and how to combine the two. By being aware of the big picture, and capable to navigate in uncertain seas, central bankers should be foxes, as well.

So, monetary policy must always take into account the analysis of the prevailing situation in the real economy, in enterprises and the society at large, recognizing its challenges and how they relate to the commitment and responsibility that central banks have for monetary stability.

Hmm..

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