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..

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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.
  • Challenges of monetary_policy_communication

    1. 1. Challenges ofMonetary Policy Communication: Bank of Uganda Experience October 2012 By Kelvin Kizito Kiyingi
    2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 11. Content & Structure of BoU’s Monetary Policy CommunicationWebsite Social Media Statements Policy Reports Exchange Rates10/23/2012 11
    12. 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. 13. Internal Tools • Statements Intranet • Rates • Interpretations E-mails • Information • Knowledge Exchanges Sharing • Internal Forums10/23/2012 14
    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. 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. 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. 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. 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. 19. Challenges of Monetary Policy Communication(Play a video from BoU website: Optional) 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. 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. 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. 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. 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. 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. 25. Questions10/23/2012 26