Open communication with market participants and the general public enhances the transmission of central bank policies and boosts their credibility, says Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, who is currently on an official visit to Kiev (Ukraine).
“Until just a decade ago, central banks were rather secretive institutions, however now transparency is one of their key operating principles. The need for greater openness was prompted by the general understanding that accountability builds public confidence in central banks and their decisions, which bear significant importance for economic growth on a domestic, regional and international level,” said Mr Vasiliauskas. He also stressed that public confidence is one of the key factors ensuring central bank independence, which, in turn, enhances their credibility.
The Chairman of the Board of the Bank of Lithuania has been invited to speak on a panel at “Central Bank Communications: From Mystery to Transparency“, an annual conference organised by the National Bank of Ukraine and the National Bank of Poland. During his visit, he will meet with Jakiv Smolii, Governor of the National Bank of Ukraine, to discuss monetary policy, economic and other relevant issues. Mr Vasiliauskas will also give a presentation on recent developments in central bank communication at the National University of Kyiv-Mohyla Academy.
As also noted by the European Central Bank, in recent years central bank communication has become one of the key monetary policy instruments that helps steer market expectations and influence market participants’ behaviour, for instance, investment decisions with regard to different asset classes. Central bank communication has gained more prominence in the low interest rate environment, which has prevailed since the 2008‑09 global financial crisis.
Central bank independence calls for their transparency and accountability. Comprehensive explanation of policy decisions through more intensive communication reaches a wider audience, which helps increase awareness of central bank activities and strengthen.