# A clean sweep for the Fed, nil points for the ECB _A tale of two central banks. Why the new Fed chair's drive for less communication is the right instinct, and why the ECB's latest rate hike was a mistake its own members are only making worse._ Neil Woodford · 17 June 2026 · 6 min read ![The facade of the Federal Reserve building](https://cdn.sanity.io/images/v3acfbvo/production/8505d0d0d7cd28d3fd7782c52d3a796854f086d6-2700x1800.jpg?w=1600&fit=max&auto=format) --- This was another good week to compare the difference between good central-banker speak and the nonsense that so often emanates from those who sit in judgement over the cost of money. In my opinion, not surprisingly, it was a clean sweep for the new chair of the Fed, Kevin Warsh, and another _nil points_ for the ECB. Let me elaborate. I have never been a fan of the relatively new habit, much loved by members of rate-setting committees, of self-promotion through speeches and set-piece interviews focused on their monetary policy views. Some argue that this provides greater transparency and helps financial markets, businesses, and households understand what is influencing policymakers and even guide them on what to expect at future meetings. This may be true, but I have a number of problems with this desire to be constantly updating everyone. The first point to make is that the Fed, ECB, and MPC meet eight times a year, and official communications accompany the decisions taken at each meeting. In other words, clarity every six weeks about the latest committee thoughts about inflation, employment and interest rates and all other things pertinent to rate-setting decisions. _(Neil in the margin: The Fed is the US central bank, responsible for setting interest rates and managing inflation and employment. The ECB is the eurozone’s central bank, and the MPC is the Bank of England’s committee that sets UK interest rates.)_ I am not at all sure markets need any more clarity than this, and my fear is that too much information can be as bad as too little. For example, the Fed has twelve voting members, the ECB has, unbelievably, twenty-six, and the MPC has nine. That's a hell of a lot of speeches and papers to get your head around if each is keen to make their voice heard in competition with their peers and with half an eye on their future careers in academia or investment banking after serving their respective terms. It gets especially confusing when doves want to counteract the hawks and vice versa. The result is often just a lot of noise that detracts from the central, calm message that should be conveyed at each meeting. _(Neil in the margin: Doves favour lower interest rates and looser policy to support growth and jobs, even if inflation runs a bit hotter. Hawks favour higher rates and tighter policy to keep inflation under control, even if growth slows.)_ ![Who actually gets a vote?](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/d6714db0-e351-4bfd-99b1-4789ce2ef372-2bc7e8f369ce-light.png) The other problem created by this apparently constant need for individual members of the committees to update their audiences is that their views can become entrenched, and then they feel the need to defend them for fear of looking indecisive, even when the circumstances change, which, of course, they have a habit of doing. ## Return to the Golden Era at the Fed Although I have long admired the way the Fed conducts itself in these matters, it, too, has created the 'dot plot' trap for its committee members. The track record of these explicit, anonymised forecasts is not good. Indeed, Vincent Reinhart, who ran the Fed's monetary affairs division and held various senior positions at the Fed during the 1990s, described the dot plots' forecasting record as abysmal. _(Neil in the margin: The Fed's quarterly chart, in which each official anonymously marks where they expect rates to sit in coming years. Markets treat it as a forecast; the Fed insists it isn't a commitment, which is precisely the trap they fall into.)_ Not that long ago, Alan Greenspan, who was Fed Chair for eighteen years until 2006, was rightly famous for being deliberately obscure about Fed policy and his own views. For example, he once joked that he had 'learned to mumble with great incoherence' and once told a Senate Committee in 1987: _(Neil in the margin: Vintage Greenspan, who cultivated deliberate vagueness so markets couldn't pin him down — the polar opposite of today's forward-guidance habit. The art of saying enough to seem informative while committing to nothing.)_ > If I seem unduly clear to you, you must have misunderstood what I said. > > — Alan Greenspan, Federal Reserve Chair · 1987 So, to return to the latest missives from the Fed and the ECB. The brand-new Fed Chair is clearly setting out his stall, and this week said he wants to overhaul the Fed’s communications, suggesting that, in effect, less is more: he wants less talk and for the Fed to try to guide markets less. His plans may include slimming down the quarterly Summary of Economic Projections, shortening FOMC statements and reducing the length of post-meeting press conferences. He added that he wants to get back to the 1990s (Greenspan's era) when the Fed was more closed, and debate was hashed out internally rather than externally. _(Neil in the margin: The SEP is the Fed's quarterly compilation of officials' forecasts for growth, unemployment, inflation and rates — the document that contains the dot plot. Trimming it is Warsh signalling he wants the Fed to guide markets less.)_ _Hear, hear as far as I'm concerned._ ## Madness at the ECB Compare and contrast this with the latest nonsense from the ECB. My guess is that there is already some embarrassment rippling across the faces of the twenty-six-member committee that last Thursday announced a unanimous decision to increase interest rates by a quarter point, one working day before Pakistan announced the US/Iran peace deal. The rationale cited for this decision was the fear the committee had about the 'major energy price shock' that was rippling across the EU economy and the second-round effects this price shock would have on inflation, despite the chronic weakness of the European economy. _(Neil in the margin: The fear that a one-off price jump (here, energy) feeds through into wages and other prices, embedding higher inflation rather than fading. It's the central banker's standard justification for tightening into a supply shock.)_ In my opinion, this decision was a mistake and, within a few days, arguably looked ridiculous. But to compound the error, various members of the rate-setting committee, presumably in a pretty embarrassing attempt to bolster their credibility, kept digging. Although ECB president Christine Lagarde welcomed the peace deal, some of her colleagues cautioned that it would not immediately bring down inflation. The German representative went further by saying that there was 'no relief in sight for the foreseeable future', adding that it would take months for oil supplies to return to normal. The Slovakian member, not wishing to be outdone by his German colleague, went one better by hinting, darkly, that 'the mission is not complete. With today's information (I presume the peace deal), it is increasingly evident that monetary policy has more work to do. ## Where’s the energy price shock? When I read this, I have to say that I was left wondering what these policy makers were focusing on. Characterising what has happened to oil prices as a 'major energy price shock' is just not objectively true. ![Characterising what has happened to the oil price as a “major energy price shock” is just not objectively true.](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/GkHGlOKB65AiWYoGZp5Qhi-885350b404b8-light.png) What happened in 2022 and 2023 was. The war in Ukraine resulted in much higher oil prices for the best part of two years and a massive and prolonged spike in gas prices too. ![EU gas prices are almost exactly where they were last year.](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/AL80FMGEBihmbyZTuowMAo-f195dac389e4-light.png) EU gas prices are almost exactly where they were last year (i.e. unmoved from their pre-war level) and the oil price has been elevated this time for only three and a half months. Uncomfortable and unwelcome, but not a 'major energy price shock', especially when set against the fact that the ECB didn't raise rates at its April and May meetings when the oil price was over $35 higher than it is today. It's also worth noting that today's Brent crude price is only just over 10% above where it was the day before the war started back in February. _(Neil in the margin: The North Sea oil benchmark used to price most of the world's crude, and the relevant gauge for European energy costs. Up only ~10% from the pre-war level hardly fits the ECB's 'major shock' billing.)_ Also, I am totally perplexed at what the Bundesbank President said about 'no relief in sight'. Is a $38 a barrel fall in the oil price from its March peak not the definition of 'relief'? I also have to take issue with the ECB member's view that 'inflation will remain elevated even if energy prices fall faster' (than what, I am not sure). Taking the UK as a pretty good proxy for what is likely to happen in Europe, it is pretty clear that the CPI impact in June and July of what has already happened to fuel prices (diesel and petrol) is to reduce inflation by 0.3%, which should mean that instead of increasing to 3.5%, UK CPI will peak at 3.2% this year, considerably lower than the 3.8% peak last year. Or in other words, an immediate impact on headline inflation even before the latest fall in the oil price has worked its way through to the pump. _(Neil in the margin: Note the base effect at work: cheaper fuel mechanically drags the annual inflation rate down because it's compared against a higher year-ago price. The 'impact' arrives before pump prices even fully adjust.)_ ## Conclusion I welcome the new Fed Chair’s ideas about how the Fed should communicate in the future. I am a firm believer in less being more in this context and that would apply similarly to the MPC whose more hawkish members seem far too often to be proclaiming their incomprehensible academic nostrums. As for the ECB, whose latest interest rate decision was so quickly exposed as a mistake by events unfolding in the Persian Gulf, my advice would be to put the shovel to one side and shut up. The increase was an error and will be reversed soon in my opinion. Trying to justify that error with public pronouncements that make no sense just adds insult to injury and is fooling no one.