(Bloomberg) -- Central banks have a better chance of taming inflation without a recession by improving how they communicate monetary policy, according to the International Monetary Fund.
In a chapter of its upcoming World Economic Outlook released in Washington on Wednesday, officials wrote that messaging is key to ensuring that households and businesses don’t focus too much on previous increases in consumer prices.
“The expectations channel is critical,” the authors said. “Improvements in monetary policy frameworks and central bank communication strategies can help bring inflation back to target more quickly and at a lower output cost — in other words, they can increase the chances that the economy makes a ‘soft landing.’”
Central banks themselves have repeatedly observed that jargon-clouded communication has made their messaging more difficult for people to grasp.
Several have have tried to become more approachable and expand their public outreach. In the US, the Federal Reserve this week announced that it will join Instagram and Threads in the hope of increasing accessibility and the availability of news and educational content.
#EconEdMonth. It’s designed to help all students understand how everyday economic decisions and policies affect their lives, their families, and their world.Learn more: https://t.co/g0qoE9pFBE pic.twitter.com/LLYLJKXQfi— Federal Reserve (@federalreserve) October 3, 2023
The fund said that emerging-market central banks tend to struggle more in communicating forward-looking policies than those in advanced economies. The question of how monetary intentions are articulated and disseminated is crucial in any setting, the fund’s economists said.
“Both inflation expectations and inflation would decline modestly more quickly with improvements in monetary policy frameworks and communication — such as simpler and more regular messaging and better targeting of audiences — that boost the share of forward-looking learners in the economy,” they wrote.
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The IMF paper, authored by Silvia Albrizio, John Bluedorn, Allan Dizioli, Christoffer Koch and Philippe Wingender, praised moves by central bankers in Brazil to adopt a continuous inflation target from 2025, the publication of preset meeting calendars in Pakistan and Uruguay, and the choice in Chile and Thailand to make price stability a primary policy objective.
The problem faced by officials is that the fruits of such decisions aren’t immediate.
“Such measures may take time or be more difficult to implement than tighter cyclical policies, which come with much higher costs in terms of slowing growth,” the economists said.
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