Monetary policy communication – past ECB policymakers commend Bank’s progress and call for more

This is not surprising central banks need to explain increasingly complex monetary policies, often in the context of broader mandates.

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Provider:

ECB

URL:

https://www.ecb.europa.eu//pub/economic-research/resbull/2022/html/ecb.rb220324~dcbe7c69b0.en.html

Retrieved on:

Friday, November 11, 2022

Information

Summary

Key Points:

This is not surprising central banks need to explain increasingly complex monetary policies, often in the context of broader mandates.
In the light of these developments, it is important to assess current communication practices and identify any room for improvement.
In the survey we sought their views on euro area monetary policy communication, the related challenges and the road ahead.
Nevertheless, some respondents commented on the risk that communication with financial markets can go too far, in particular if market expectations dominate policy.
The survey also asked for respondents views regarding the various types of forward guidance, which refers to central banks communicating about the future path of monetary policy.
With regard to the representation of individual views, most respondents thought that the ECBs monetary policy communication was about right (Chart 3).
Diversity of views on the Governing Council
Notes: The figure shows the responses to the question In most central banks, monetary policy is set by a committee.
Whereas some central banks encourage that the diversity of views on the committee is represented in the external communication, others have adopted a one-voice policy.
Where, in your view, is the monetary policy communication by Governing Council members located along this spectrum?
Overall, the respondents assessed the ECBs monetary policy communication as broadly adequate.
These results reveal that, from the perspective of former policymakers, what constitutes effective communication varies across audiences and is likely to evolve over time.
Central banks would therefore be well advised to continue assessing and adjusting their communication practices.