Farz Edraki* examines the lengths central banks go to around the world to educate their communities and finds one that communicates by music.
Whenever the Reserve Bank of Australia issues a statement — whether it’s a quarterly assessment of monetary policy or its monthly meeting minutes — people listen.
But if you’re not a financial analyst or an erstwhile banker, do you really understand what they’re saying?
You’re not alone if you can’t make much sense of jargon-laden forecasts — or if you’re not that interested.
And it’s not just an issue for Australians.
For years, central banks across the world have been caught in a deliberately vague, cautious dance with the markets they operate in.
But increasingly, they’re talking to broader audiences and trying to make their communication more engaging.
In Jamaica, that means turning to reggae.
A new approach
Communications play a “crucial role” for central banks, says Olga Stankova, special assistant to the communications director of the International Monetary Fund.
“They help to establish credibility of central bank monetary and policy frameworks and … central bank independence — and maintain it as well,” she tells Richard Aedy on The Money.
Their remit can include anything from explaining general monetary policy like inflation targeting, to providing information around issuing new bank notes.
“Many central banks are also involved in financial stability policies and they communicate on bank stress test, bank restructuring resolution, macro and micro-credential policies,” Ms Stankova says.
When central banks have something to say, it’s mostly economists, businesses, politicians and market analysts who listen.
Jamaica’s approach represents a unique way of getting ordinary people interested.
When the Bank of Jamaica was presented with the challenge of explaining the benefits of a new monetary policy regime of full-fledge inflation targeting, it turned to music videos.
“They are deploying radio advertising, social media and billboards with powerful messages inspired by Jamaica’s cultural background, popular culture, including reggae music,” Ms Stankova says.
“They have made it popular not only in Jamaica, but also worldwide.
“These video clips, they are very colourful and interesting in the way they’ve done this.”
What about in Australia?
In Australia, you’re most likely to hear the RBA’s name mentioned in the news after it meets on the first Tuesday of every month to decide on interest rates.
It plays a significant role during times of financial crisis — such as in 2008, when former RBA governor Glenn Stevens cut the cash rate from 7.25 per cent to 4.25 per cent (between September to December).
What does the RBA do?!!
* Set the ‘cash rate’ to meet an agreed medium-term inflation target (the cash rate being the interest rate on overnight loans in the money market)
* Works to maintain a strong financial system and efficient payments system
Issues banknotes
Eli Remolona, formerly of the Federal Reserve Bank of New York and the Bank for International Settlements, says most central bank communiqués are vague on purpose.
“Central banks don’t like to “tell it like it is”, he says, because “they want wiggle room”, particularly when it comes to managing interest rates.
“They’re planning to cut, but at the last moment they may decide, ‘No, we shouldn’t cut’,” says Dr Remolona, now at the Asia School of Business in Kuala Lumpur.
“Also they want a little bit of ambiguity … just so the market can react in its own way.”
It’s a tactic designed to prevent what Dr Remolona terms the “monkey-in-the-mirror phenomenon”, whereby central banks don’t want the market to mirror what they’re saying in times of economic stress.
In this sense, central bank communication isn’t a one-way street.
“Because what happens in a market is that if there’s a very clear signal, then everyone just focuses on that and it overreacts to that signal,” he says.
Finding new ways to get the message across
But increasingly, central banks like that of Jamaica’s are recognising their audience is changing, and they want to be as clear as possible.
“A growing number of central banks … are now investing in new communications practices and technologies, including social media,” Ms Stankova says.
It’s all an attempt to broaden their reach beyond traditional economic circles.
“Explaining policies through the public and thus emphasising central bank accountability to society as a whole is becoming increasingly important,” she says.
Ms Stankova says this is thanks, in part, to “the growth of internet and social media”.
“Rising level of noise in media environments and public information space is [a] significant challenge for central banks and for other economic policy institutions,” she says.
The Central Bank of Russia is also using videos to get their message across.
According to Ms Stankova, this includes “very interesting videos on their website with good press conferences, very good interviews”.
The RBA’s social media accounts are also doing more than just posting media releases.
Its 42,000 Twitter followers can see visual charts, bulletins and videos in their feed.
It’s unlikely Australia will take a leaf out of Jamaica’s book and set a statement of monetary policy to The Herd or Cold Chisel.
But never say never.
* Farz Edraki is an associate producer at the Australian Broadcasting Corporation. She can be contacted at edraki.farz@abc.net.au
This article first appeared on the ABC website www.abc.net.au
