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IMF Standardizes Global Central Bank Narratives Amid Increased Public Scrutiny

The International Monetary Fund (IMF) is promoting central bank “transparency” worldwide in an apparent effort to get ahead of declining public perception of central banks, offering countries reviews of their websites and communications to ensure they are more in line with its approved narrative. The efforts are probably a public relations ruse to gain public trust with propaganda not sound monetary policy. 

“Independence demands transparency,” said Stefan Ingves, who spent 17 years as governor of Sweden’s Riksbank through last December, in a January interview with Central Banking. “If you’re independent, it’s vital that people can understand what you are doing. If you are independent and you tell the general public ‘It’s none of your business,’ independence will be taken away from you, sooner or later.”

The Bank of Canada released detailed summaries of its Board of Governors discussions last month for the first time. It joins almost two dozen other central banks that routinely publish extensive propaganda about their monetary policy. 

“Economic and financial turbulence calls for greater transparency from policymakers,” writes the IMF, suspecting global populist movements could come after central banks across the world. “As central banks raise interest rates to curb inflation, stakeholders increase their scrutiny. In some countries policymakers face growing calls to reign in their autonomy. To maintain public trust, safeguard independence, and enhance policy effectiveness in the face of such challenges, monetary authorities must focus on transparency and accountability.”

The IMF senses a rising tide against central banks and is looking to get ahead of any popular movements to decrease their independence, such as Sen. Ron Paul’s “End The Fed” legislation in the United States. 

The IMF’s Executive Board adopted in 2020 a new voluntary code on central bank transparency, which is a comprehensive set of principles covering responsibilities, functions, and operations. 

Based on this code, the Fund offers Central Banks an opportunity to engage in the revision of their transparency practices to ensure their own communications are in lockstep. 

Their reviews are important, too, for public relations. “They also help facilitate more effective communication between central banks and their various stakeholders, including lawmakers, news media, academics, and the public. This helps them to adjust their communication tools, channels, and messages to the needs of the targeted audiences, reducing uncertainty and contributing to better policy choices.”

To date, the IMF has reviewed the central banks of Canada, Chile, Morocco, North Macedonia, Seychelles, Uganda, and Uruguay, covering governance, policies, operations, outcomes, and relations with other formal stakeholders, such as governments and financial regulators.

In addition to the Bank of Canada’s decision to publish summaries of policy discussions, Chile’s central bank approved a new transparency policy, building on an IMF transparency review, and created a dedicated section of its website providing further insight into its operations. 

The Central Bank of the Seychelles began publishing its monetary policy report, and the Bank of the Republic of North Macedonia disclosed details about audits and risk management. 

The Central Banks of Morocco, Seychelles, and Uganda used their review findings to improve communication efficiency, developing institutional strategies and strengthening communications units. 

The IMF concludes: 

As central banks face mounting challenges, it is critical that they improve transparency because, ultimately, their independence and policy effectiveness will be at stake.

Future transparency reviews will be available to all IMF members as a voluntary tool to improve transparency and accountability. The Fund will also build a repository of transparency practices, based on information documented during the reviews, to facilitate peer-learning among staff at different central banks. The new tool will help reinforce trust in central banks, as well as their credibility and effectiveness in an increasingly complex world.

In  August 2022 St. Louis Federal Reserve Bank president James Bullard observed, “The current U.S. macroeconomic situation is straining the Fed’s credibility with respect to its inflation target.” 

In April 2021, a poll indicated low trust and public perception of the Federal Reserve. The percentage of respondents who believed the Fed was doing poorly (13%) was more than triple the share who say it’s doing an excellent job (4%).

The amount who have no trust in the Fed whatsoever (15%) is triple that of those who have a great deal of trust (5%). 

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