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Chapter 21, Part IV. Central Bank Representatives.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Nov 3, 2011.

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  1. Administrator

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    Part IV. Central Bank Representatives. [​IMG]
    Commander in Pips: So, now we’ve estimated that currency rates strongly depend on interest rates, and Central Banks use them as one of the major tools to govern economy and stability. All that stuff makes up monetary policy. Still one question remains – how particularly does a Central Bank announces its monetary policy. What for we have to expect, how it usually happens…

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    As you, probably understand, a Central Bank is not just a single man in small square room. This is a huge authority. In fact, a central bank has many more common issues with any large company than it may seem at first look. As with any company that has a president or some kind of leader, say, chairman, a central bank also has him/her. To be the chairman and representative of a Central Bank is a great honor and responsibility. So, when, say, Mr. Buffet, Bill Gates speaks in public – they attract a lot of attention and rush. So, if so much attention is attracted by people who rule just single company, should it be much more when we speak about economy of US, or EU? That’s why when Ben Bernanke or Mario Draghi speaks during regular or special testimony, almost all the financial world listens. Since everybody wants to know which way will monetary policy turn and what adjustments are coming. You better follow what they say. Our luck is that Central Banks are well-organized in terms of communication with the markets. They have a predetermined schedule of meetings, speeches, testimonies etc.


    Not only central banks can determine and have impact on monetary policy, but speeches of chairmen are usually analyzed with great scrutiny. Solid financial institutions, like big banks, financial companies, as a rule have special analyst who “transcribe” Central Bank speeches into normal language to clearly understand what a central bank intends to do.


    Pipruit: Hm, what do you mean – translation of Draghi’s speeches from Italian into English?​


    Commander in Pips: Absolutely not. For instance, in recent statement, Bernanke said, that Fed intends to remain using the current policy during a “considerable period of time.” But how long is this “Considerable” period. A speech of any central Bank representative is full of such hints that are needed to be translated into real terms and conditions, so that some commercial bank may know what to expect.


    Pipruit: And why they can’t say it straight and clear?​
     
    #1 Administrator, Nov 3, 2011
    Lasted edited by : Sep 25, 2016
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