Challenges of monetary_policy_communication

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Communication monetary policy, especially under the Inflation Targeting Lite monetary policy framework, poses certain challenges. Bank of Uganda's experience is quite insightful..

Communication monetary policy, especially under the Inflation Targeting Lite monetary policy framework, poses certain challenges. Bank of Uganda's experience is quite insightful..

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  • Topic
  • Introduction
  • Contents
  • Inflation TargetingLite introduced July 2011
  • Implementation
  • Key components of monetary policy decision making process
  • Broad functions
  • At times the Governor uses Verbal Intervention
  • Business journalism is relatively new in Uganda
  • Improvement in business journalism
  • Social media affected by limited access to the internet
  • School children are involved
  • Tools for external monetary policy communication
  • BoU staff play an ‘ambassadorial’ role
  • The communication process is disrupted
  • One of the key challenges
  • At one time certain section of business community (traders) demanded for low interest rates, low exchange rate and low inflation
  • Lack of awareness of monetary policy limitations
  • Futuristic, but mainly for the youth
  • For effectiveness, Media buys (advertisements) are the better options
  • This is unlike in the developed economies
  • The Deputy Governor’s article was widely read by several audiences
  • These are some of the key suggestions
  • The conclusive remarks point to the possible way forward.
  • I hope my presentation has not raised more questions than answers.

Transcript

  • 1. Challenges ofMonetary Policy Communication: Bank of Uganda Experience October 2012 By Kelvin Kizito Kiyingi
  • 2. IntroductionWho is Kelvin Kizito Kiyingi?MABJ, Reuters FellowCity University of New YorkPost Bank, Communication Manager U.S. Embassy Kampala, Information Assistant Bank of Uganda, Assistant Director, Communications Department10/23/2012 2
  • 3. OutlineMonetary Policy Decision Making at BoUContent and Structure of BoU’s Monetary Policy CommunicationBackground: New Monetary Policy FrameworkChallengesConclusion10/23/2012 3
  • 4. New Monetary Policy FrameworkIn July 2011, Bank of Uganda introduced Inflation Targeting lite (ITL) monetary policy framework, replacing monetary aggregate targeting.ITL more discretion on the part of policy makers than monetary aggregate targeting.Therefore, credibility and transparency play important roles10/23/2012 4
  • 5. New Monetary Policy FrameworkSensitization workshops/seminars for key stakeholders.Use of the policy rate, the Central Bank Rate.High Inflation, Depreciating Exchange Rate.10/23/2012 5
  • 6. Monetary Policy Decision Making at Bank of UgandaDaily Financial Markets Operations Sub- Committee Meeting Chaired by Deputy Governor Technically this committee does not make monetary policy decisions, it only implementsWeekly Monetary Policy Committee (MPC) Meeting Chaired by GovernorKey Monthly MPC which sets CBR, key meeting for taking decisions10/23/2012 6
  • 7. Monetary Policy Communication FunctionsExternal Communication Enhance the effectiveness of Monetary Policy decisions Contribute to the credibility of Central BankInternal Communication Build a better understanding amongst Central Bank staff, management and board10/23/2012 7
  • 8. Content & Structure of BoU’s Monetary Policy CommunicationMonthly Monetary Policy Statement One hour after MPC In-depth explanation Forecast of inflation Media engagement Media with EDR10/23/2012 8
  • 9. Content & Structure of BoU’s Monetary Policy CommunicationThe Media Publishing the Monetary Policy Statement verbatim in key newspapers Placing articles in the press Talk shows both on Radio & Television Press interviews10/23/2012 9
  • 10. Content & Structure of BoU’sMonetary Policy CommunicationThe Media Since the introduction ITL, the media devotes much more attention to monetary policy. CBR is “visible” in a way that monetary aggregates are not Everybody knows/sees interest rates. Therefore bound to attract more attention10/23/2012 10
  • 11. Content & Structure of BoU’s Monetary Policy CommunicationWebsite Social Media Statements Policy Reports Exchange Rates10/23/2012 11
  • 12. External Tools Website Radio/TV Media Talk Shows Training Monetary Monetary Money Policy Policy Museum Statements Outreach Placements Programmes Monetary Policy Reports10/23/2012 13
  • 13. Internal Tools • Statements Intranet • Rates • Interpretations E-mails • Information • Knowledge Exchanges Sharing • Internal Forums10/23/2012 14
  • 14. Challenges of Monetary Policy CommunicationLanguage Official/business language is English The functional literacy in English is limited Over 40 languages in Uganda10/23/2012 15
  • 15. Challenges of Monetary Policy CommunicationLack of informed debate Low economic and monetary literacy levels Little understanding of the demand management concept: Private Consumption; Private Investments; Government Spending; Exports10/23/2012 16
  • 16. Challenges of Monetary Policy CommunicationLack of informed debate contd. Lack of understanding of BoU’s role amidst a liberalised environment Failure to understand difference between monetary and fiscal policy Relationship between interest rates, exchange rate and inflation10/23/2012 17
  • 17. Challenges of Monetary Policy CommunicationLack of informed debate contd. Limited knowledge what macroeconomic policy can do and cannot do Paucity of independent institutions which can contribute informed analysis, forecast etc...10/23/2012 18
  • 18. Challenges of Monetary Policy CommunicationWebsite & Social Media Limited bandwidth Internet Access Social hubs, You tube No Mobile phone version of BoU website10/23/2012 19
  • 19. Challenges of Monetary Policy Communication(Play a video from BoU website: Optional)http://www.youtube.com/watch?v=JqmyKA8s f0I&feature=player_embedded#t=20sVideo Slide: A Clip of Governor, Bank of Uganda, Professor Emmanuel Tumusiime- Mutebile, addressing a press conference at which the Monetary Policy Statement for September 2012 was issued.10/23/2012 20
  • 20. Challenges of Monetary Policy CommunicationThe Media Lack of qualified business journalists Limited interpretative reporting Business sections are heavily influenced by advertising from big companies10/23/2012 21
  • 21. Challenges of Monetary Policy CommunicationDual Role Perhaps the biggest challenge informing and educating concurrently Lack of monetary policy communication capacity Under the ITL framework, convincing the public what will happen over the next few months Convincing the public the most likely outcome and therefore the interest rate decision is the most correct one.10/23/2012 22
  • 22. Challenges of Monetary Policy CommunicationDuring tough times Some want both low interest rates, low inflation and a strong shilling at the same time. Deputy Governor wrote10/23/2012 23
  • 23. Proposed Solutions Monetary Policy Fact Sheets: Once a year, to use as publication for guests and for induction. (Internal and External) Recordings of press conferences and posting the entire transcript on the website Live broadcast (internet, television and radio)Coverage of press conferences Monetary Forums (already in use in Kenya) Introduce Monetary Policy School/University Challenges (already in use in South Africa).10/23/2012 24
  • 24. ConclusionFor effective communication of monetary policy I recommend five main things: Use of more local languages Concerted and continuous media training Continuous public awareness initiatives Re-positioning of the website We are entering a new era with ITL, which requires a much more complicated communication approach. We should not be afraid of debate; we should stimulate public debate.10/23/2012 25
  • 25. Questions10/23/2012 26