Northern Rock shows fallibility of communication

The run on Northern Rock, a British mortgage lender, illustrates the potential downside of central bank communication around stability issues, says Gary Stern, the president of the Minneapolis Federal Reserve.

"Policymakers hoped the announcement of central bank support for Northern Rock would quash depositors' inclination to pull funding. It had the opposite effect; government support reinforced concerns about Northern Rock's solvency and depositors' access to their funds," Stern said.

He added

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