Bank of Canada Governor Tiff Macklem called for a “sea change” in central bank communications, saying the pandemic makes it more important than ever to build trust with the public.
In remarks to the Federal Reserve Bank of Kansas City’s 2020 Jackson Hole Symposium, Macklem cited a number of reasons why central banks needs to communicate more clearly with the public at a time when the perception of central bank independence is under threat, and disinformation on the internet is rampant. Those reasons include keeping inflation expectations well anchored, ensuring public servants remain accountable for their actions and making sure monetary policy is effective as possible.
“Central banks are conducting unconventional monetary policies alongside extraordinary fiscal stimulus, which is challenging public perceptions of our operational independence,” Macklem said. “So, it is more important -- yet harder -- for central banks to be trusted sources of information and analysis.”
The pandemic has caused a “huge disinflationary shock” and disrupted information channels, he said. The Bank of Canada made its first every foray into quantitative easing and has lowered its interest rate to the lower effective bound of 0.25 per cent.
The bank has taken some steps to sharpen its public communications, including online campaigns to address inflation perceptions and creating short animations on its key reports. But there is more work to be done against the backdrop of COVID-19, Macklem said.
“In a nutshell, we need to spend more effort speaking and listening to the citizens we serve,” he said. “Diversifying our engagement improves our capacity to make better policy decisions and enhances our legitimacy as public institutions. That is more important now than ever as we grapple with COVID-19 and its harsh economic consequences, which affect everyone.”
The Bank of Canada will use four principles to guide its communication with the public including telling a coherent and consistent story with incoming data, using clear and plain language, making sure the content is relatable and relevant and listening to the public.
While the impacts of the pandemic will leave lasting legacies including social upheaval, debt burdens and foregone economic output, Macklem is hopeful that a focus on clearer communications with the public will also result in a deeper relationship between the central bank and its citizens.
“These efforts will help us to make better policy decisions, reinforce our legitimacy and cement trust with our citizens,” he said. “The stakes are high, and this opportunity should not be missed.”