The decades preceding the pandemic may have had their rocky moments, but they now enjoy a retrospective glow of tranquillity. That era, marked by subdued inflation and relatively stable growth—with a subprime meltdown thrown in for good measure—has given way to a period of discomfort and unpredictability. Central bankers seem to expend as much energy debating what to call the current times as they do on adjusting policies to address them. For investors, one piece of advice stands out: expect surprises.

François Villeroy de Galhau, the Governor of the Banque de France, has coined this new era as one of “Great Volatility,” a stark departure from the so-called “Great Moderation.” He previously lamented the loss of a “Garden of Eden.” Meanwhile, Ryozo Himino, Deputy Governor of the Bank of Japan, has devised his own poetic label: “The Great Wave.”
Drawing inspiration from Hokusai’s iconic artwork, Himino used his metaphor during a speech to regional bankers to prepare the ground for a potential rate hike. This announcement shocked markets, especially after the BoJ’s recent commitment to a cautious approach. Himino vividly illustrated his point by abruptly resetting expectations: central bankers are like fishermen tossed about by the waves, powerless against the elements.

In this new reality, past certainties might well be gone for good.
This turbulence isn’t confined to the G7. A surprisingly resilient U.S. economy, a roaringly strong dollar, and, of course, Donald Trump have turned the Federal Reserve’s outlook into a guessing game. A small but vocal contingent on Wall Street is wagering that the Fed will not only delay rate cuts but might actually raise rates.

Over in Asia, two decisions last week sent shockwaves through markets. In Indonesia, policymakers who had spent months trumpeting their commitment to monetary stability suddenly slashed interest rates. This was even as the central bank intervened heavily in currency and bond markets to support the rupiah. The justification? A pivot towards prioritising growth.
South Korea, meanwhile, offered the opposite surprise. With a standoff between its ousted president and parliament dragging down the won and growth, a rate cut seemed inevitable. Instead, the central bank held firm. Yes, the won has been under pressure, but so has the economy, with unemployment rising by a full percentage point. If ever there was a time for a rate cut, it’s now—or at least that’s what you’d think. Instead, the Bank of Korea kept its powder dry, leaving the door open for action in the coming months.

Politics is everywhere. Himino’s imagery of Hokusai’s “Great Wave”—depicting tiny humans grappling with the raw power of nature—aptly captures the precariousness of today’s economic environment. “I don’t know what kind of era awaits us,” Himino remarked, “but even if it’s the era of the Great Wave, I hope we can weather it together.”
It’s a nice sentiment but not exactly reassuring. Central banks wield immense power and should be doing more than spinning poetic metaphors to justify their policies. It’s also worth remembering that the much-mythologised “Great Moderation” wasn’t all it’s cracked up to be. While the U.S. and Western Europe enjoyed strong growth and controlled inflation in the late 1990s, emerging markets endured a series of devastating crises, and Japan struggled with deflation. The “good old days” weren’t all sunshine and roses.

Today’s crop of policymakers faces a cocktail of challenges: an imbalanced global economy, supply chain disruptions, and climate change, on top of the usual struggles for price stability and sustainable growth. The expectation for greater transparency from central bankers only adds to the madness, a legacy of the enhanced communication strategies adopted during simpler times. Gone are the days when central bankers like Alan Greenspan—dubbed “Maestro”—projected an aura of omnipotence. And perhaps, just perhaps, that’s a good thing.