"Drastic" word foreshadows a surprise Ukraine rate hike

The National Bank of Ukraine used unusually “drastic” language in a comment on higher than expected inflation earlier this month, which — in hindsight — foreshadowed a second consecutive interest rate hike that caught the markets by surprise.

Two sentences were marked in bold in the NBU’s regular monthly comment on inflation released on December 11, three days before the rate-setting meeting:

The actual inflation came in higher than was forecasted in the October 2017 Inflation Report as food prices were rising at a faster rate.

The current trend of the CPI and its components is higher than the forecast published in the October 2017 Inflation Report showing a more drastic deviation, than expected, of inflation from its target by the end of 2017.

To me, the “drastic” word was the clearest possible signal that the NBU is readying to tighten policy further following its October rate hike, the first since March 2015. Central banks rarely use such strong language in official communications, unless they truly want to make their point.

As it turned out, Ukraine policymakers delivered on the pledge to act to bring inflation back to their target on December 14, hiking the key policy rate to 14.5%.

Seems like markets in Kiev have yet to learn to digest and properly interpret the NBU’s policy signalling. To catch even the smallest, but still useful, nuances, it may be worth paying extra attention to the central bank’s English pronouncements.

Speaking to public in plain and concise form promoted at all star central bank conference

The world’s top central banks have taken their fair share of criticism not only for adopting unconventional policies following the financial crisis but also for failing to explain the unorthodox measures they were taking in language that could be understood by the general public. It is clear they have learned the lesson from that.

Following are a couple of takeaways I made from watching the world’s leading policymakers discuss central bank communications at a recent all-star conference on this topic at the European Central Bank.

  • Major central banks such as the Federal Reserve, ECB, Bank of England and Bank of Japan clearly understand that they need to be clearly understood to influence public expectations and remain credible. Code words and convoluted language have fallen out of fashion. Plain talk in simple language is the new trick of the trade.
  • Despite the push for greater transparency and clarity in communications, policymakers — constantly faced with a wide array of economic uncertainties — are unlikely to provide the degree of certainty on the future policy path that markets have generally been longing for.
  • To make complex forecast and policy messages accessible to the wider public, central banks increasingly tailor the content of their pronouncements to the requirements of each communication tool they are using, and to the audience watching that particular channel of communication. The BoE has dubbed this technique “layering”.
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Below is a selection of key quotes from a policy panel debate — led by Bank of England’s Mark Carney, ECB’s Mario Draghi, Bank of Japan’s Haruhiko Kuroda, and Federal Reserve’s Janet Yellen — that I personally considered in any way interesting and inspiring:

Haruhiko Kuroda, Bank of Japan

“Communication is not a matter of technique … it is a matter of policy itself. From my experience in the last 4-1/2 years, the best communication policy is to explain in straight words the content and intent of your monetary policy which can be understood not just by monetary experts and economists, but also the general public.”

Janet Yellen, Federal Reserve

“We try not only to explain what changed about the economic outlook that justified (our policy action) but also the objectives we are trying to achieve. For the broader public, as opposed to market participants, the most important thing to know is what it is that we are trying to achieve?

They do want to know that we are committed to our 2 percent inflation objective, that we want to achieve our employment mandate. We will readjust these (policy) instruments as we think necessary in light of those policy goals, that’s are our commitment.

But I do think that market participants are looking for greater certainty about the policy path than central bankers believe is appropriate to offer most of the time.”

Mark Carney, Bank of England

“Look at what we put out: a 50-page Inflation Report, we still communicate in 15-page speeches with lots of charts, expert audiences read them, understand, digest, respond to them, that’s true, but that’s not the way to communicate with the general public. This is not a sustainable form of communicating in a world that has had enough of experts, it is also not consistent with how people access information.

(To make information accessible), you have to change the content. What we have tried to do … is to layer the content, so you have a very simple message that is tweet-able, that can go out on whatever decision is made… and to take a 50-page Inflation Report and reduce it down to a relatively simple narrative with icons, key charts that explain why we did what we did, and then to use multiple channels in order for that to get out.

In order to be as effective as possible on speaking with the broader public and actually ultimately getting to a dialog as opposed to a monolog with them, we need different channels, we need different content, but we need that change within the institution, and you only get that if you open it up to a broader number of people that just those at the top.”

A communication gap between central bankers and the public

My former colleague, Czech central bank Vice-Governor Mojmir Hampl, in the OMFIF Bulletin on what he called a growing lack of understanding and a communication gap between central bankers and the public:

"... central banks have been warning about the risk of flooding for so long that they are now unable to explain that drought can be just as big a problem. They are also unable to explain that at times of drought you should water the garden, not keep draining it dry. And if the hosepipes are blocked, you must use other means to water the plants.

In tough economic times, it is difficult to describe quickly such a story to a public which is inattentive to the mysteries of complex systems. This is particularly true in the case of financially conservative and wealthy populations who strongly prefer future consumption to present consumption (and even more so in populations of net lenders rather than net borrowers like Germany, Austria or many other countries in central Europe).

This is the challenge which we, as a community of occasionally tedious central bankers, now face. We should hurry up."

Overcoming this challenge will be difficult, but hopefully not impossible...

Central bankers ignore public speaking rehearsals at their own peril

An important tidbit of information from this week’s post-FMOC press conference:

Fed Chair Janet Yellen clearly was well prepared to face journalists' questions about the U.S. election, and Donald Trump in particular. As an eagle-eye journalist pointed out, Yellen was apparently reading from a prepared statement when answering a question whether the Fed was keeping interest rates artificially low to support the Obama administration, as the Republican presidential nominee has charged.

United States Federal Reserve Chair Janet Yellen holds a news conference following the two-day Federal Open Market Committee meeting in Washington, U.S., September 21, 2016. (Reuters picture)

United States Federal Reserve Chair Janet Yellen holds a news conference following the two-day Federal Open Market Committee meeting in Washington, U.S., September 21, 2016. (Reuters picture)

Here is the relevant part of transcript of Chair Yellen’s press conference):

JON HILSENRATH. Jon Hilsenrath, from the Wall Street Journal. Chair Yellen, Donald Trump, the Republican presidential nominee has charged that the Fed is keeping interest rates artificially low to support the Obama administration. I'd like to hear what you have to say to that charge. And on a related note, I wanted to ask you about the Fed's next policy meeting which is in early November a week before the next election, given that the case for raising rates you say today has strengthened, should the public see that November meeting as a live meeting when a rate action could happen? Thank you.

CHAIR YELLEN. Well, I think Congress very wisely established the Federal Reserve is an independent agency in order to insulate monetary policy from short term political pressures. And I can say, emphatically, that partisan politics plays no role in our decisions about the appropriate stance of monetary policy. We are trying to decide what the best policy is to foster price stability and maximum employment and to manage the variety of risks that we see is affecting the outlook. We do not discuss politics at our meetings and we do not take politics into account in our decisions. As I said, we're generally pleased with the progress of the economy. And the decision not to raise rates today and to wait for some further evidence that we're continuing on this course is largely based on the judgment that we're not seeing evidence that the economy is overheating. And that we are seeing evidence that people are being drawn in, in larger numbers than at least I would have expected into the labor market and that that's healthy to continue. But that nevertheless, we do need to be forward looking. And if we continue along this course, it likely will be appropriate to raise the federal funds rate. And November, you asked about as well. Well, every meeting is live and we will again assess as we always do incoming evidence in November and decide whether or not a move is warranted.

When I speak to senior central bankers in various parts of the world — be it Eastern Europe, central Asia, or Africa — I always stress the importance of devoting time and effort to prepare Governors well for public appearances such as press conferences or speeches. A nation’s leading central banker ignores rehearsals ahead of his or her public speaking engagements at their own peril.

A hike in inflation targets seen as a cure for stubbornly low inflation

A group of economists, including former Central Bank of Ireland chief Patrick Honohan, has spoken in favor of raising central banks' inflation targets to meet their price stability mandates and boost their economies.

The latest Geneva Report on the World Economy:

Although policymakers have tools for stimulus at the lower bound, these may not always be enough. We therefore also consider adjusting policy frameworks to reduce the risk that nominal rates hit zero. Of the many proposals out there, the most obvious and simplest of such adjustments would be a modest increase in central banks’ inflation targets.

Perhaps the most common reason that policymakers have resisted raising the inflation target is the concern that credibility will suffer. We believe this concern is unwarranted and misplaced. Central banks should seek credibility for their commitment to meet their ultimate goals – full employment and price stability – not for their commitment to a particular number for the inflation target. A greater risk to central bank credibility may be the protracted inability to meet their mandates at the current low targets, due to the lower bound constraint.

The paper joins a raft of academic publications offering suggestions on how to prevent central banks from becoming increasingly impotent to deliver on their promise to engineer 2 percent inflation when interest rates have reached the zero lower bound.

True that the inability of central banks, in many developed countries around the world, to meet their declared 2 percent objectives poses a clear credibility threat.

When Fed’s Fischer speaks, markets listen

When Federal Reserve Vice Chairman Stanley Fischer speaks, markets listen. Not only because Mr. Fischer is an influential member of the Fed’s policy-making body. Also because the former Governor of the Bank of Israel, prior to his appointment to the Fed, seems to be carefully choosing when and what to say.

This week, just as markets across the globe were digesting the shock British vote to leave the EU, Mr. Fischer offered his first public comments on the economy and monetary policy since March 7, according to Bloomberg.

Fischer said the US policymakers were in a wait-and-see mode following the British referendum on the EU:

“We got hit by something. We are still evaluating it,” he said on CNBC. “My guess is that it will be less important for the U.S. than the countries directly involved -- almost just logically so. We will wait and see.”

“… so as we consider the effects of Brexit, we have to put that effect on the U.S. together with what else is going on in the U.S. economy,” he said. “I hope that we strengthen, and that the economy strengthens, and that we continue along this slow, very gradual path we’ve been on.”

Clearly quite a re-assuring talk by a steady-hand at the Fed’s helm.

To me, it comes as a little surprise that Fischer’s first public appearance in three months came just now, amidst the market turmoil caused by the Brexit. When else to use communications as a tool to re-assure the nervous markets that it was business as usual at the US central bank.

Good example of how a central bank should speak after Brexit

Lars Christensen, the Market Monetarist, wrote the statement that the Fed should have written and released publicly, had the U.S. central bank been a true, hard-line inflation targeter.

I was laughing out loud when reading Lars' post on his blog. Not because it is overtly funny but because his text is a brilliant illustration of how a pure inflation targeter would, and should, communicate at a time like this. Unfortunately, hardly any central bank has resorted to this clear and open mode of communications.

The following is Lars' reworked version of what the Federal Reserve put out as a two-sentence, one-paragraph statement:

"The members of the Federal Open Market Committee note that the British people have voted to leave the European Union. The decision today has caused an increase in volatility in global financial markets and increased demand for safe assets including increased demand for the US dollar. This effectively is an unwarranted tightening of US monetary conditions.

While the Federal Reserve is not in the business of fine tuning neither the US economy nor the financial markets, the Federal Open Market Committee nonetheless would like to remind market participants that the Federal Reserve has a 2% inflation target. Expectations for Fed Fund rates should reflect this target and so should expectations for potential asset purchases.

Presently market inflation expectations on all relevant time horizons are below this target and the Federal Reserve therefore stand ready to take the appropriate action to ensure inflation expectations match the 2% inflation target. In this regard it should be noted that the Federal Reserve has the ability to increase the money base as much as necessary to hit this target.

This means that the Federal Reserve remains committed to offsetting any internal and external shocks to nominal demand in the US economy that might jeopardize the inflation target. The Federal Open Market Committee will not allow inflation expectations to drift significantly away from the 2% inflation target."

Sadly, it seems there are few pure, openly-communicating inflation targeters among major central banks these days. Read my earlier post on major central banks singing the same tune after Britain's vote to leave the EU to see how they opted to hide in their statements behind vague and ambiguous wording about readiness to "consider any additional policy responses" or "take appropriate measures as necessary".

Swiss central bank unusually transparent about FX action

Swiss National Bank gave rare confirmation that it had intervened in the currency market to weaken the Swiss franc in the wake of Britain's vote to leave the European Union, as reported by Reuters:

"Following the United Kingdom's vote to leave the European Union, the Swiss franc came under upward pressure," the SNB said in a statement. "The Swiss National Bank has intervened in the foreign exchange market to stabilise the situation and will remain active in that market."

According to Reuters, the SNB normally declines to comment on whether or not it has been active in the currency market.

This unusual transparency seemed to serve as a sort of statement on its own, to demonstrate to markets along with other major central banks that the SNB is alive and kicking and performing business as usual.

Major central banks sing the same tune after Brexit

In the wake of the UK vote to leave the EU, the world's leading central banks appeared to have coordinated their public statements. They sang from the same song sheet in their statements to reassure markets about their commitment to provide liquidity and take policy measures as needed to fulfill their statutory responsibilities.

Let's have a look what each of the major central banks had to say:

BOE - "ready to provide additional funds"

Mark Carney, Governor of the Bank of England, in a televised statement following the EU referendum result:

... as a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities.

The Bank of England is also able to provide substantial liquidity in foreign currency, if required.

In the coming weeks, the Bank will assess economic conditions and will consider any additional policy responses."

The BoE also put out on its website a list of answers to most frequently asked questions about Brexit.

ECB - "ready to provide additional liquidity"

In a press release headlined "ECB is closely monitoring financial markets", the European Central Bank said:

"The ECB stands ready to provide additional liquidity, if needed, in euro and foreign currencies.

The ECB will continue to fulfil its responsibilities to ensure price stability and financial stability in the euro area."

Fed - "prepared to provide liquidity"

The U.S. Federal Reserve said in a two-sentence, one-paragraph statement:

"The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy."

G7 - "ready to use the established liquidity instruments"

G7 Finance Ministers and central bank Governors in a statement:

We recognize that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability.

G7 central banks have taken steps to ensure adequate liquidity and to support the functioning of markets. We stand ready to use the established liquidity instruments to that end.

We will continue to consult closely on market movements and financial stability, and cooperate as appropriate.

Japan - "will take appropriate measures as necessary"

Japanese finance minister and central bank governor issued a join statement:

"The Ministry of Finance will monitor further developments of the foreign exchange market more carefully than before and take appropriate measures as necessary. Such measures are consistent with the agreements in G7 and G20.

We are also aware of risks related to liquidity funding in foreign currencies. In this regard, a network of currency swap arrangements is already established by the central banks of major countries. The Bank of Japan will take appropriate measures as necessary, including activation of this network."

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.


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:


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.


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.


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.