Diego Maradona’s famous goal against England in the 1986 World Cup has inspired an innovative theory about the interest rate policy that has been shaping the economy in recent years.
The theory argues that The central banks of the countries must emulate the skill of Maradona in that goal, keeping investors in suspense and anticipating their movements.
The key lies in the genius of the Argentine soccer player, who, despite running in a straight line, managed to get rid of five rivals thanks to his feints. It is about applying that policy to interest rates: investors have to react more to which the monetary authorities warn that it could happen in the future (the feint) than at the current interest rates (where the player is going).
An example from a few months ago: when Jerome Powell, chairman of the US Federal Reserve, announced that he would not reduce interest rates immediately, although he said that “officials are discussing whether to do so within months.” That phrase sent the stock up.
Investors, like those deceived by Maradona, found themselves forced to anticipate future plays rather than reacting solely to the current situation.
