interview is with Charles
Wyplosz, one of the authors of How Do Central Banks Talk?,
the third in the series of Geneva Series on the world economy.
James Morgan talks to him
about the report, which evaluates recent changes in how
central banks talk to the markets, to the press, and to the
public, and assesses the the communications strategies of the
major central banks.
call for still more transparency in central banks. But what
was wrong with secrecy? The Fed and Bundesbank controlled
markets by springing surprises
Change in society…RBNZ and Bof E successes…discovery
that transparency doesn’t hurt and can in fact help. ...
to the 1994 change in Greenspan’s approach it was thought
markets had to be told what to do and surprise was needed. You
now put predictability as the priority
Markets cannot be pushed easily by central
banks… shape expectations by being open, readable…utterances
taken on board immediately ...
central banks react after 11 September in a way that would have
been different from the way they did before?
Bad habits reappeared ... central banks lowered
rates without fully revealing the reasons ... were afraid of
stock markets collapse but talked about risk to growth ...
report advocates publication of forecasts. Is there not a
risk, if forecasts are wrong and bank has to backtrack?
On the contrary ... decisions rest on forecasts ... wrong
forecasts, wrong decisions ... forecast errors are human …
wrong reasoning is professional failure ... easier to say ‘we
have to change our policy’ if there is a public forecasting
disagreements among bank committee members are made public,
cannot this threaten credibility, especially if the media
support the minority?
Disagreements are inevitable ... monetary policy
not a science ... intelligent debate needed…unanimity a
fiction…sharing doubts builds up credibility ...
are making the same rules for disparate systems. Hong Kong at
one end, Fed at the other, therefore there should be different
No one best way of carrying out policy ...
always diversity ... but central banks have to do the same
things ... understand, forecast, analyse ... have to be public
whatever the procedure ...
there a contradiction between the Fed’s lack of transparency
and its enormous prestige and the poor reputation of the ECB,
which is more open?
Puzzling ... Greenspan the superhero ... but at
least no longer obfuscates ... ECB’s problem is the two
the next move for transparency?
Fed chairman will be more open…and a change at ECB will mean
end of two pillars…monthly press conferences will give way
to better means of communication.