Extract

New York — Central banks face an inherent challenge in a world where nuance is out of fashion and policy conversations happen in 280 characters or less.

What they do ranges from the mildly specialist to the mind-bendingly complex, and it’s risky for central bankers if the public has no idea what they’re up to — or why. Policies to stabilise inflation work best when people believe in them, because they depend on expectations of where prices will go. And a popular backlash against higher interest rates can bring political heat.

The Bank of England. Picture: THINKSTOCK
The Bank of England. Picture: THINKSTOCK

The fix? Puppies. And reggae songs, cartoons, dancing fishermen. The Fed and its global brethren, from the Bank of Jamaica to cod-fixated Norway, are turning to social media and finding new ways to explain themselves to even the most lay observers.

Some of the efforts may fall on deaf ears (the European Central Bank has 1,600 followers on Instagram, fewer than its 2,500 staffers), but it’s a good time to try. Several of the world’s biggest monetary authorities are moving toward tighter policy, setting themselves up as obvious scapegoats if economies lose their shine. And as populism sweeps the globe, established institutions — especially those with unelected leaders — need to shore up public faith.

“Our challenge is to speak in plain English, as opposed to a high-tech scientific language that only half a dozen people actually understand,” Reserve Bank of New Zealand governor Adrian Orr said at his first press conference last May.

Beyond words

It’s a widespread problem. The Bank of England examined its own publications in 2016 and concluded they required a college-level reading age, and that eighth- or ninth-grade would be a better starting point. The Philippines central bank carried out similar readability tests and decided its statements “may not really be for a wider audience” — one reason it began live-streaming meetings in 2018.

Reaching beyond words could be part of the solution. Orr’s bank has begun publishing a “monetary policy statement in pictures” to explain its stance. One cartoon showed an arrow approaching its target, another a “speed bump” sign meant to signify uncertainty.

Jamaica’s central bank has added melody to the visuals, posting music videos on Twitter. “Inflation’s not the enemy if we control it,’’ goes one of its reggae songs. “If it’s too high, the people have a cry. If it’s too low, the economy don grow.’’

The clips made a splash, with some garnering hundreds of thousands of views. Norway’s central bankers could be forgiven for wondering what the fuss was about — because they were making monetary music first. Back in 2017, Norges Bank posted a video in which fishermen in yellow raincoats sing about cod. It was an introduction to the new 200-krone note, which prominently features the fish.

Much of the recent communication out of central banks is similarly light. It appears to be trying to make institutions with an ivory-tower reputation seem relatable, even hip.

Fed dogs

On Twitter, Minneapolis Fed chief Neel Kashkari likes to intersperse his wonky observations about inflation and employment with pictures of his Newfoundland dogs and his latest barbecue. The Atlanta Fed is trying to make #dogsofthefed happen on Instagram, where the ECB was touting a to-do list last month: “Build a snowman, eat cookies, keep prices stable.’’ #Notjustforchristmas.

There’s also a more serious side to the new messaging. Bank Indonesia, which has more Twitter followers than the Federal Reserve, has been live-streaming its meetings since 2015 and central banks in Thailand and the Philippines followed suit in 2018.

And it’s not always short form. Bank of England governor Mark Carney spent more than an hour answering online questions earlier in January, ultimately posting more than 10,000 words. John Williams, now the New York Fed president, took part in similar forums when he led the San Francisco Fed.

In fact, the use of new media is just one part of a longer-running attempt at transparency.

Alan Greenspan was famously cryptic early in his tenure as Fed chair. But late-phase Greenspan and his successors worked to explain policy more clearly. Globally, it’s become common practice for central banks to engage in national and local outreach.

Rome, Bologna and Venice have hosted “Meet the Bank of Italy’’ events for a wider public, and dozens more are planned nationwide. The ECB recently celebrated its 20th birthday, prompting president Mario Draghi to call for some “candid’’ thinking about how to complete Europe’s monetary union. Videos shared with the bank’s 460,000 Twitter followers could help to include the public in that debate.

New challenges

Central banks are using new communication tools in part because they face new challenges. Recent US presidents have avoided direct criticism of the Fed, but Donald Trump has attacked it on Twitter and elsewhere for raising interest rates. The Bank of England needs to stay nimble amid Brexit turmoil; the ECB can’t assume that European harmony is a done deal; and all of them have to reckon with cryptocurrencies and digital banking, which are making cash more complicated.

Yet amid all the change, the old conundrum persists. It’s tough to reach a broad audience and demonstrate accountability when your message involves things such as the Phillips Curve and neutral interest rates.

The world’s most powerful central banker ran up against the problem during his first year as Fed chair. Jerome Powell said from the start that he’d try to keep communications simple, and won some early praise for doing so.

But when Powell said in October that rates were “a long way” from neutral, he got blasted. “A long way” might be accessible language, but it’s also imprecise. Markets reacted sharply, believing the Fed chief was flagging a hawkish turn. It was a reminder that trying to be transparent carries risks.

“His attempt to speak in plain English is laudable,” said Omair Sharif at Societe Generale in New York. “But all of these different outreach attempts, they also just introduced a lot more opportunity for fumbling that message.”

• With Lorenzo Totaro, Jill Ward, Michael McDonald, Michelle Jamrisko and Matthew Brockett.

Bloomberg