Why the Bank of England must watch its words

Once upon a time, it was only Alice who vanished down a rabbit hole into Wonderland. Nowadays, we're all falling in head-first – thanks to a bunch of central bankers.

But as we're down here, in this inverted quantitative easing (QE) world, Mark Carney, governor of Britain's central bank, should probably heed the words of Humpty Dumpty who warned Alice that she'd only gain control of reality if she became "master of words."

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In Alice's looking-glass reality, and maybe ours too, sense has become nonsense and nonsense sense – and not just because of asset bubbles.

"'The question' said Humpty Dumpty, 'is which is to be master?'" The words or the girl?

All central bankers worry about being imprisoned by their own words. But it will be preoccupying Carney's thoughts more than ever as the Bank of England prepares its historic move to publish the minutes alongside the rate setting committee's decision, due to begin in August.

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The frenzied over-analysis of the U.S. Federal Reserve's choice of words could not have escaped his attention, with its decision to drop the phrase "considerable time" dominating newspaper columns and analysts notes. One economist complained privately that his job had morphed from monetary policy to structural linguistics.

Back in March 2011, Jean-Claude Trichet, the then president of the European Central Bank (ECB) got hemmed in by his own verbal signaling. Ironically, it was one of his favourite catch phrases: "strong vigilance". It eventually forced his hand into making an ill-advised rate hike from 1 percent to 1.25 percent despite a deteriorating economic climate, duly sending the euro zone into recession.

Of course, the ECB's current boss, Mario Draghi, understands Humpty Dumpty's lesson about making words perform the exact meaning one wants, though 1.1 trillion euro ($1.25 trillion) of QE and a crisis in Greece might now fully test "whatever it takes".

UK inflation: What BoE needs to focus on
UK inflation: What BoE needs to focus on   

Words have already proved a challenge for Carney, dubbed the "unreliable boyfriend" by one MP for oscillating utterances that confused the markets. Sometimes he's implied rates will rise soon, only to follow up with dovish tones.

Now he's concerned that low inflation, or even deflation, "might become more persistent if it lowered inflation expectations, pay and other cost growth in a way that became self-perpetuating" - at least according to the most recent MPC minutes. Or was that the Mad Hatter?

What about "slack", too? On the Bank's own metrics "slack" in the economy is shrinking fast, with unemployment low and wages rising. Yet, in Davos, Carney had a stab at redefining the concept, noting for example the large number of "involuntary part time workers".

Once the minutes are published in real-time, the markets' linguistic analysis will only rise. No doubt Carney might like to invoke the famous comment of US Fed chairman Alan Greenspan: "If I turn out to be particularly clear, you've probably misunderstood what I've said." Or maybe

Lewis Carroll's Red Queen puts it better: "You may call it nonsense…but I've heard nonsense, compared with which that would be as sensible as a dictionary."

-- Helia Ebrahimi is U.K. business editor at CNBC