The rich literature that followed affirms the benefits of central bank announcements in guiding market outcomes, with a number of papers showing that market interest rates have tracked policy rates more closely since the 1990’s.3 Separately, communication was also shown to reduce the size of central bank interventions required to achieve desired policy rates.4 Further, effective communication from central banks on the future path of monetary policy, or forward guidance, can potentially be a powerful tool in a global environment of low nominal rates and reduced policy space. The seminal paper by Eggertsson and Woodford (2003) demonstrated that changes in the expected future conduct of monetary policy can have a substantial effect on the macroeconomy, even when the economy is at the zero lower bound and conventional monetary policy has lost potency. Subsequent empirical research also show that forward guidance can help macroeconomic stabilisation efforts.5 Nevertheless, despite the clear trends and benefits of greater information dissemination, central bank transparency has evolved cautiously including in the region, reflecting in part the irreversibility of communication initiatives. From the perspective of preserving policy integrity and effectiveness in a second best world, more is not necessarily always better. At each step along the way, central banks therefore need to take account of the potential costs against the perceived benefits of greater transparency. Several considerations could be pertinent. First, too much information may crowd out the formation of private sector beliefs.
A recent Economist article even asked, “Can central banks talk too much?”15 It essentially argued that forward guidance on interest rates could complicate price dynamics in the bond market as the central bank simultaneously signals its intentions to the markets, while taking its cue from them. As policy decisions are ultimately a judgement call made against an inherently uncertain backdrop, there is naturally a limit to how much transparency can do to make central bank action predictable. Communication is also context-specific, where a standard rules-based approach will not work. Discussions at forums like this are extremely valuable because they provide the opportunity to share experiences from real-life settings, including what has worked and what has not, as well as the pitfalls and the nuances. Hopefully, some general guiding principles can emerge, that will prove useful for practitioners gathered here today. In conclusion, the guidelines for monetary policy communications are probably due for a refresh given the increased complexity facing the formulation and implementation of monetary policy. For 3/5  BIS central bankers' speeches  sure, central banks must continue to talk, engage, and be accessible and accountable. How we do it could evolve, and this high-level seminar serves to help us do just that and hone our communication skills. I wish you a most productive session. Thank you. References Bernanke, B S (2007), “Federal Reserve Communications”, Speech at the Cato Institute 25th Annual Monetary Conference, Washington, D.C., 14 November.