Clear, Consistent and Engaging: ECB Monetary Policy Communication in a Changing World

Abstract

This paper examines the importance of central bank communication in ensuring the effectiveness of monetary policy and in underpinning the credibility, accountability and legitimacy of independent central banks. It documents how communication has become a monetary policy tool in itself; one example of this being forward guidance, given its impact on inflation expectations, economic behaviour and inflation. The paper explains why and how consistent, clear and effective communication to expert and non-expert audiences is essential in an environment of an ever-increasing need by central banks to reach these audiences. Central banks must also meet the demand for more understandable information about policies and tools, while at the same time overcoming the challenge posed by the wider public's rational inattention. Since the European Central Bank was established, the communications landscape has changed dramatically and continues to evolve. This paper outlines how better communication, including greater engagement with the wider public, could help boost people's understanding of and trust in the Eurosystem.

Central bank communication and social media: From silence to Twitter

“…As central banks have started employing communication as a core part of their monetary policy toolkit in the early 1990s, they primarily targeted expert audiences such as financial market participants, academics, policymakers, and specialized media, rather than the wider public (Assenmacher et al., 2021). Although this strategy has been largely successful in explaining monetary policy decisions to expert audiences, the communication with the general public has lagged behind.…”

“…-Blinder ( 2018) "It is important for me that our focus on connecting with the people of the euro area, those we serve, continues and grows much stronger, in particular by improving the way in which we communicate with the general public." - Lagarde (2019) As central banks have started employing communication as a core part of their monetary policy toolkit in the early 1990s, they primarily targeted expert audiences such as financial market participants, academics, policymakers, and specialized media, rather than the wider public (Assenmacher et al, 2021). Although this strategy has been largely successful in explaining monetary policy decisions to expert audiences, the communication with the general public has lagged behind.…”

“…Central banks have transformed their communication practices significantly over the past three decades (Issing, 2005; Assenmacher et al., 2021). Whereas prior to the 1990s, communication around monetary policy was surrounded by silence and secrecy, in recent decades, central bank transparency and communication have become key instruments in central bankers' policy toolkit and have drastically transformed the way monetary policy is conducted (Smaghi, 2007; Blinder et al., 2008).…”

Communication of News Contributor Organizations at Diskominfo Agencies of Nunukan Regency

“…In order to communicate effectively, communicators need to know which target group they are aiming for and what kind of reaction they want (Assenmacher et al, 2021). The communicator must have experience encoding messages, taking into account how the communicant will monitor the encoding of messages.…”

Monetary Policy Communication: Perspectives from Former Policy Makers at the ECB

“…In addition, it reached out to external counterparts, by means of listening events with the public as well as through conferences and roundtables with expert audiences (ECB 2021b). In the context of its review, the ECB has had extensive discussions of its communication practices (Assenmacher et al 2021) and has adopted a number of changes as a result. For instance, as part of the new strategy that was announced in July 2021, it was decided to adapt the communication to reflect the new monetary policy strategy, to complement the communication with layered and visualised products that are more geared towards a general audience, and to regularly conduct outreach events with the public.…”