What does the public know about monetary policy?
Carin van der Cruijsen, David-Jan Jansen, Jakob de Haan have a piece on how central banks can improve their communications with the public.
Central banks have typically targeted their communication at financial markets. Increasingly, however, many have started actively communicating with the general public. Using Dutch survey data, this column finds that the public’s knowledge of monetary policy objectives is far from perfect, and varies widely across respondents. Those with a greater understanding of ECB objectives tend to form more realistic inflation expectations. Central banks seeking to target the general public must take account of discrepancies in households’ knowledge of and interest in monetary policy.
When financial markets who track every bit of central bank cannot figure things, how can public figure out what is going on?
All this is also interesting from another perspective. Central banks historically have been created to serve either governments or fin markets (or both). There was hardly a public angle to these organisations. Now, this whole idea has changed to serving the public. It has become a recent fascination as central banks seek a broader public role. They wish to be seen as a public institution like the legal system, police and so on. They have actually been partially successful in this endeavour as they have surpassed all these institutions in terms of noise and hype. With so much coverage, there is a feeling amidst public that something big is going on. But the public hardly has the skills to figure the reality. So, it lets the things be.
So this idea of reaching out to public is interesting. But then this could backfire as well as monetary policy is so jargonish that people might actually misunderstand what is going on.