Monetary policy communication – past ECB policymakers commend Bank’s progress and call for more
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Friday, November 11, 2022
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This is not surprising central banks need to explain increasingly complex monetary policies, often in the context of broader mandates.
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.