Latin American central banks should improve communication strategies – IMF

Latin American central banks should communicate about monetary policy decisions in a simpler and clearer way, a blog post published by the International Monetary Fund says.

Yan Carrière-Swallow, Etibar Jafarov, and Juan Yépez conclude this would improve policy transmission to market inflation expectations. The authors build on research from the IMF’s most recent Regional Economic Outlook for the Western Hemisphere.

“There has been a push across the region’s central banks to increase the level of detail transmitted to the public, providing longer explanations regarding the state of the economy and the factors behind policy decisions,” the authors explain.

However, the authors say their research shows that for many of the central banks, longer documents have tended to result in “lower clarity”.

They are “generally more difficult to understand than the business section of the local newspaper,” the authors write.

Instead, the authors suggest, central banks should concentrate on the tone of press releases and minutes, as they tend to affect “not only the short end of the yield curve but also medium- and long-term interest rates”.

Such changes, the authors conclude, could offer central banks “greater room for manoeuvre” in interest rate policy when responding to inflation shocks.