On excellence in central bank communication

As an exception to the rule, I publish a central banking story written by an outside author.

I invited my former colleague Niels Bünemann to share his own thoughts on central bank communication on my blog (Niels first published his piece in Central Banking Journal).

Niels is a former principal press officer at the European Central Bank: We both were part of the ECB's Communications Committee when I served as Head of Communications at the Czech National Bank and Niels worked at the ECB.

Earlier this year, Niels and I met again when he chaired a Central Banking training seminar on "Communications and External Relations for Central Banks" in Windsor, United Kingdom. I spoke about social media at that seminar.

In his piece, Niels gives an overview of some of the best practices in central bank communications. I may make a couple comments on his piece on this blog at some point, but for now, let me stress the following: First and foremost, it is important to keep in mind that central banks do not communicate to become more popular. They communicate to help them shape expectations, and in turn achieve their policy goals - as Niels himself implicitly states in the introduction to his article.

Read Niels' full take on the topic of central bank communication below:

Searching for excellence in central bank communication

One quarter of a century ago, central bank communication was mainly related keeping information inside the Bank – and preventing it from spreading outside. Now, a ballooning number of central bank press officers, web editors and social media consultants are trying to garner popular support for the policies their superiors have adopted.

Indeed, communication itself has become an integral part of the policies: I need only mention “forward guidance” as the most obvious example of using communication as a policy tool in its own right. Forward guidance in turn comes in many forms and shapes, such as expected paths of the policy interest rate (in Norway, Sweden, New Zealand and others), or the meanwhile famous “dot plot” in the minutes of the Federal Open Market Committee’s meetings, or committing to certain actions if certain contingencies should arise. That amounts to laying bare the central bank’s reaction function.

This upgrading of communication in itself has the quality of a paradigm shift. Add to that the tectonic changes in the media landscape, and in individuals’ patterns of media consumption, and you have a scenario that calls for a broad-based re-alignment of communication activities. The crux of the matter is that some of the new tools, ways and means available to central bank communicators open up a number of pitfalls. Avoiding these requires skillsets that are not necessarily inherent in organisations that were used to performing merely conventional monetary policy or old-style banking supervision.

Let me be a little bit more specific about the pitfalls before I turn to the search for excellence in the various communication disciplines.

Pitfalls

First, credibility is put on the line. Forward guidance aims at giving financial markets a higher degree of certainty about the level of future interest rates. But in real time, monetary policy decisions remain data-dependent. Experience shows that the economic environment often changes in a way not envisaged, and then the guidance given actually turns out to have been misleading, or at least to be perceived as such. Whether such a perception is justified or not, it takes a toll on the central bank’s credibility, which is undisputedly the most precious asset of any monetary authority – it’s literally a sine qua non. In addition, central banks giving forward guidance risk being taken hostage by financial markets. Accordingly, they might shy away from making decisions that could unleash dramatic volatility in the markets.

Second, the use of new tools, in particular social media platforms, can be a double-edged sword. The upside is a direct access to the targeted audiences offered by Facebook, Youtube, Twitter & Co. The downside is difficulty in maintaining control – although this is not as powerful an argument as it used to be in the early days. More about that a bit further down in this article.

Third, there is a risk that central banks would bite off more than their modestly staffed communication department can chew. Placing yourself effectively in the consciousness of millions of people takes a lot of man- and woman-power, and maintaining your place there requires even more. When I say „modestly staffed“ it accurately describes the state of affairs a few years ago.

In the last couple of years an unprecedented expansion of communication departments could be observed in almost all central banks across the globe, precisely because policymakers have realised the necessity of first-class communication as a pre-condition for first-class performance.

Best practices

I have been a first-hand witness to this development, having met colleagues from six continents at the annual seminar "Communications and External Relations for Central Banks" that I had the privilege to chair for the last ten years. That experience is the basis for the following description of best practice as it has crystallised within the various disciplines of central bank communication.

Let us take a look at each of them separately:

Website

The website embodies most of the other communication tools. It goes without saying that your overall communication can be no better than your website allows it to be.

Key considerations for making the website second to none are the following:

  • Ease of navigation, including appropriate prioritisation of contents on the landing page
  • Timeliness of updates; operationally this usually means real-time updating on every single working day (and sometimes beyond that)
  • Contents segmented according to targeted audiences. Ideally, there should be sections aimed at professionals and other sections aimed at the general public – the latter phrased in more accessible language and with conscious use of visual elements
  • Mobile friendliness. This implies among other things the avoidance of pdf-documents to the extent possible, since html-pages adapt much better to the small screen on a smartphone.

News releases

Formerly known as „press releases“ – but in today’s world they are targeted at a broader group than merely media representatives – the news releases constitute the main format for informing the public about important developments. The stress here is on „important“, in other words: to achieve excellence in this particular genre, it is crucial to apply journalistic methods. Hence, it’s no wonder that central banks, in order to get this right, are increasingly hiring staff with a background in journalism.

Getting it right means, among other things, adhering to these principles:

  • Restricting the issuance of news releases to cover only issues that fulfil certain news criteria, primarily: relevance, significance, actuality
  • Phrasing the news release in non-technical language
  • Restricting the length of a release to a maximum of two DIN A4 pages
  • Giving it an active headline, preferably including a verb
  • Providing a short summary, e.g. in the form of three bullet points
  • Making sure that market sensitive information is delivered in a way that does not discriminate between financial market participants.

In my experience, the difficulty in determining whether or not to issue a news release often stems from the fact that expert staff or high-level officials tend to be myopic in their views. Hence, press departments have to navigate between Scylla and Charybdis. In some cases, officials want to suppress information that should be made public, citing confidentiality, legal risks or fear of negative media coverage. In other cases the opposite is the case: an expert may be so fascinated by her or his own work that she/he wants to share it with the whole world. That is a very sympathetic trait in many ways, but not useful when determining the relevance for the public of a certain piece of information.

The challenge of ensuring equal treatment between media outlets and market participants is solved in different ways by different central banks, depending on the specifics of the local environment. One popular way of doing it is the so-called “lock-up”, meaning that journalists from real-time media (e.g. wire services such as Reuters, Bloomberg, Dow Jones et al.) are invited to receive market sensitive information in advance, sitting in a dedicated room at the central bank, from which external communication is only possible at a certain, pre-set time. Once the information is free for publication, communication lines from the lock-up room are enabled.

Social media

Central banks got off to a very slow start when social media became a mainstay of most people’s lives around ten years ago. Until a couple of years ago they either had no policy for using social media such as Facebook, YouTube, Twitter, Instagram, LinkedIn, Snapchat etc. etc., or the policy was to keep out of that realm.

It was probably right for them not to be in the avantgarde of embracing new media. There is a risk in moving first, especially for institutions that cherish their image of being rather staid, conservative, solid and „above the fray“ of political bickering. On the other hand, you have to find your audiences where they are, and the fact is that large parts of the population are migrating from consuming mainstream media to getting their news from social media.

If it’s important to be on social media, which platforms are the most suitable for central banks? Well, it depends on the local cultural environment, but a few guideposts are more or less universally visible.
By far the biggest platform worldwide is Facebook with more than 1 billion active users. Facebook is taking big steps with a view to becoming a hub for news-reading. This will be further amplified as its latest initiative, known as “Instant Articles”, is joined by more and more media organizations. Judging by central bank experience so far, it’s a good idea to occupy some space on Facebook (or similar platforms where local FB competitors have a stronghold). Some central banks use it to support special projects like financial education, open days for citizens or cultural activities.

One argument often heard against setting up a Facebook corporate profile is that it offers critics an excellent opportunity to attack you in your own backyard. This is certainly valid for organisations or public persons who are representing controversial policies. In my native Denmark a number of politicians (middle range, not the top flight) have opted to delete their FB profiles because they were littered by comments in a vulgar tone and at times hateful posts. However, for central banks this is rarely a huge problem. Their policies may not be un-disputed, but the debate mainly takes place among professionals, and usually not in a highly polemic style.

Twitter is a platform that is currently struggling to maintain its share of internet users’ attention in general. Nevertheless, I would argue that operating a Twitter account is a must for most central banks. If not for other reasons, then because journalists tend to rely on Twitter to be updated on time-critical developments. They expect to be served on Twitter also by central banks. A big followership is not necessary to deem a Twitter account worthwhile, what counts is the quality of the class of followers.

Clearly, doing social media work is time-consuming. That holds true even for central banks that are not themselves operating profiles. Monitoring “the talk of the town” in the field of your business is almost mandatory, and supplements traditional media monitoring. If you don’t have the manpower within the bank to handle that, it can be outsourced. A plethora of agencies is offering such services.

Speeches

Far from being a backward and old-fashioned communication tool, speeches deserve a prominent place in the communication strategy. Three aspects make up best practice in this field:

  • Conscious choice of speaking venues and topics (as opposed to randomly accepting arriving invitations to speak)
  • Integration with other tools, such as social media, interviews and news releases
  • Organization of speech-writing. The trend is clearly towards establishing special speech-writing units, rather than leaving the speech-writing to experts in policy-relevant departments.

It’s undisputed that speeches serve an important purpose in explaining policy actions, hammering down messages and sharing knowledge or advice with important target audiences. Oral language is often more effective in doing that than written language, provided that it is conceived and delivered in accessible phrasing (that is why a generalist as speech-writer normally does a better job at it than an expert in the subject topic).
Whether speeches can also be used for “breaking news” is a different matter. Some central banks have a stated policy of avoiding this, while others have a penchant for giving policy guidance in key speeches. I lean towards recommending to accept the inevitable scrutiny of speeches for policy guidance, and take advantage of the media’s interest by stating explicitly in each speech that it has (or does not have, as appropriate) the purpose of updating the public on likely policy adjustments in the light of the most recent incoming data.

Interviews and op-eds in mainstream media

One big „pro“ and one big „con“ have to be weighed against each other when deciding if and when to give interviews to mainstream media, whether in printed publications or broadcast TV and radio. The main argument in favour is that some of the strong media brands provide access to well-defined segments of the population in a way that is still unreachable for most other protagonists. The counter-argument is that the interviewer surrenders control over the interview material. Editors determine what to publish and when, although this sovereignty can be defended to some extent through pre-arranged agreements between central bank and the journalist. Such agreements are not popular with media representatives in countries with a free press. But they do exist, and in some countries the central bank is one of very few institutions that can get away with such an agreement that reduces the editorial freedoms of media. The central bank is in a strong bargaining position, because the Governor is a highly sought-after interview partner. Two pieces of advice are important in this context: the Governor should not be over-exposed to media appearances, and the communications department should be parsimonial in its leverage of power vis-à-vis the media.

Press conferences and background media briefings

Twenty years ago it was highly unusual for a central bank to hold press conferences with the Governor/President in the hot seat in front of sensation-hungry media workers. Now, it’s common practice among major central banks to make themselves available for media questioning, mostly in the context of monetary policy meetings or the presentation of mandatory reports (e.g. Bank of England’s Inflation Report). So is this really best practice? Currently it may be seen as that. Given that the trend towards more transparency is irreversible, it may be hard to eliminate it, despite some severe drawbacks. Indeed, I have a hunch that traditional press conferences could fall out of favour for the following reasons:

  • It’s extremely difficult to handle press conferences in a way that really serves the objective of central bank communication: providing better insight into the thinking behind monetary policy decisions and thereby supporting the functioning of monetary policy instruments
  • In practical experience, un-scripted utterances by a central bank Governor/President frequently produce excessive volatility in financial markets, in particular the foreign exchange market. Recent examples of that include statements made by Mario Draghi’s at the European Central Bank press conference or by Mark Carney at the Bank of England
  • The quality of both attendance and the questions posed may deteriorate over time. In part – and paradoxically – they may be a victim of their own success: such press conferences are usually webcast and viewed in real time by thousands of interested parties, including market participants and journalists that are not themselves present at the venue. The incentive for publishing houses to dispatch journalists to the physical press conference is limited. For that and for other reasons, relevant questions may not be asked, also because a journalist by asking a question reveals to the competitors the angle pursued by that particular media outlet.

The response to these difficulties could be manifold. I think that central banks should make a virtue out of necessity and adapt the press conference tool to the brave new media world. Sweden’s Riksbank and others have shown the way by opening up the floor for questions from the broad public to the Governor, via a real-time web chat that is currently a supplement to the traditional press conference. I could imagine that in the medium term an online tool similar to that will replace the media conference.

Even if and when that happens, it will still be possible and necessary to give some form of privileged access to journalists working for professional media. It is common practice to offer background briefings on technical topics to journalists. That makes sense for the journalists who can maintain their credibility and thus their “unique selling point” by being well-briefed, capable of understanding difficult technical issues, and thus in a position to explain those issues to the broader public. And it makes sense for the central banks to rely on media brands that possess credibility, in order to reach out to critical opinion leaders. Also in the future they will constitute a crucial element in the public discussion of monetary policy and other aspects of central bank activities.

Financial education

The effectiveness of monetary policy depends on the behaviour of economic agents. Unfortunately, “homo economicus” is a non-existing creature in the real world outside of textbooks, but the more the average citizen will approximate her/his behaviour to that of a rationally thinking person, the better will function the economic models that inform policy-makers’ decisions.

That is the rationale behind central banks getting involved in financial education, which in principle is a sort of communication that ought to be taken care of by the formal education systems. Improving the citizens’ grasp of the economy and in particular their ability to manage their own finances in a rational manner, that is obviously a communication effort for the long haul.

Some stellar examples prove that a lot can be achieved with a creative and innovative approach. One such example is the Central Bank of Uruguay’s “BCUeduca” programme. Organised as a touring festival of games and exhibitions the Uruguayan central bank has managed to engage a very large part of the country’s school children and improve considerably their financial knowledge.

Conclusion

The description of best practices in central bank communication could have included even more disciplines – e.g. the migration from printed publications to online-only, or the interaction with political bodies – but I have highlighted those activities that in my view deserve the most attention when looking for possible improvements at the current juncture of technology and societal change. It is fair to say that a lot of development work remains to be done. Central banks that under-estimate the need to beef up their efforts in that field do so at their own peril. A failure to leverage communication channels to lift the heavy burden of fulfilling central bank mandates is water on the mills of those who prefer to move to a world without central banks altogether.

Niels' article was originally and first published in Central Banking Journal.