Explanation, engagement and education are essential to help the public understand why the ECB prioritises price stability over other, perhaps more tangible, economic objectives, why a positive rate of in ation, of say 2 per cent, is better than zero in ation, why people’s perception of in ation can be so different from the price index.
They are necessary, in short, to help people understand and appreciate what central banks do and why they do it. This should allow monetary policy to be trusted by the public and central banks to be able to guide the formation of expectations and to deliver effective policymaking.