THIS AINT MARADONA CENTRAL BANKING

THIS AINT MARADONA CENTRAL BANKING Dario Perkins 03 Aug 2026

Kevin Warsh’s refusal to offer forward guidance continues to stir debate, and he made another attempt to justify it at last week’s press conference. He sees financial markets as a “world class economist”, and he thinks they can provide vital signals to Fed officials about what to do. To get the best “unfiltered” advice, the Fed must avoid saying anything about the future, including “hints and nudges”. Others see a different strategy - Maradona central banking..

1/5 What is the market saying now? With real and nominal yields up significantly, the market appears to be telling the Fed to hike rates. Surprisingly, Warsh took some comfort from those moves. When quizzed about why the FOMC was all words and no action (with another no-change decision last week), he implied that the market was doing the Fed’s work for it. But isn't there a contradiction in his views? Is the market a signal, or a substitute for action? Surely it can’t be both.

2/5 To people who have been studying central banks for a while, Warsh’s comments smacked of “Maradona central banking”, a reference to a speech Mervyn King gave 20 years ago (God I’m old!). Mervyn was talking about El Diego’s second goal vs England at the 1986 world cup (not the handball…). He pointed out that the wily number 10 had managed to beat the entire England team despite running in a straight line. How? Each defender fell to floor, anticipating changes in direction that never arrived.