Central Banks can increase their effectiveness of their monetary policy communication by formatting their messages and tailoring it to the right audiences.

1. Monetary Policy Target Audience:
Expanding the Reach Through Tailored
Form and Content
July 2013
A Presentation made at the IMF –East AFRITAC Workshop on
Central Bank Communication Mount Meru Hotel, Arusha Tanzania
By Kelvin Kizito Kiyingi

2. Outline
Where we are in terms of Monetary Policy Communication.
 New Monetary Policy Framework
Role of Communication in the Monetary Policy Framework
Monetary Policy Decision Making Process
Form and Content of Monetary Policy Communication
An Illustration of Expanding Reach Through Forma and Content
Challenges
Conclusion
4/8/2015 2

3. New Monetary Policy Framework
In July 2011, BoU introduced
Inflation Targeting lite (ITL)
monetary policy framework,
replacing monetary aggregate
targeting
ITL allows more discretion on
the part of policy makers than
monetary aggregate targeting
Therefore, credibility and
transparency play important
roles
Sensitization
workshops/seminars for key
stakeholders
Use of the policy rate, the
Central Bank Rate (CBR). This
is visible in a way monetary
targets were not.
Objective of monetary policy.
Primary objective: medium-
term annual core inflation of
5%. Secondary: stabilise output
as close as possible to the
equilibrium level of output.
4/8/2015 3

4. Communication: crucial under ITL
• Under ITL private sector expectations matter
greatly
• It is very important to influence behaviour.
• If people have wrong expectations, for
example, there could be costs in terms of
output; consequences for output...20% Vs. 5%
4/8/2015 4

5. Communication: Crucial Under ITL
• Interest rates alone are not
enough in controlling
inflation
• The key to effectiveness lies
influencing private sector
expectations
•nough in controlling inflation
•The key to effectiveness lies
influencing private sector
expectations
Framework
• People Should understand
Central Bank Communication
• Clarity not ambiguity
• Avoid giving forecasts on
exchange rates because it
can trigger speculation
Communication
• Private sector expectations
are as close to the Central
Bank’s target and outturn as
possible
• Expectations influence
perception & behaviour
Expectations
4/8/2015 5
Communication helps to anchor expectations, to influence perceptions

6. The shift to IT-Lite
• Why the shift to IT-Lite.
• How BoU communicated the shift. Key to success: multi-pronged
approach: Governor, Deputy Governor, EDR.
• The time we shifted, is the time we experienced high shocks.
• They thought we were controlling interest rates by raising the CBR. We
introduced a policy rate to influence interest rates. People did not
understand. Thought we were controlling interest rates.
4/8/2015 6

7. Monetary Policy Communication Functions
Enhance effectiveness of
Monetary Policy decisions
Build better understanding
amongst Central Bank staff,
management and board
4/8/2015 7
External Communications
Internal Communications

8. Monetary Policy Target Audience
External:
 Primary Audience: Economic and commercial
decision makers, financial markets, CEO’s of
Commercial Banks, financial companies,
prospective institutional investors, business
community
 Secondary Audience: Informed members of
the public and opinion leaders e.g academics,
parliamentarians, media commentators.
4/8/2015 8

9. Form & Content: Target Audience
 Dilemma: If people are going to understand economic concepts. Limits the type of
people you can communicate to
 We try to focus on a relatively small section of society that understands economics
in a technical way.
 If we want to communicate monetary policy in a meaningful manner we need to
confine ourselves to a narrow society .
 Other forms of engagement, including financial inclusion initiatives.
 Media is key: We use the media to communicate to a broader public
4/8/2015 9

10. Form & Content : The Media
Publish Monetary
Policy Statement
verbatim in key
newspapers
Place articles in
the press
Talk shows both
on Radio &
Television
Press interviews
With ITL, media
devotees pay
more attention to
monetary policy
CBR “visible” in a
way monetary
aggregates are
not
Audiences familiar
with interest rates
so CBR attracts
more attention
4/8/2015 10
The Media

11. Form & Content: External Tools
Monetary Policy
Communication
Website &
Social Media
Media
Training/Press
conferences
/Articles
Speeches by
Governor &
Deputy
Governor
Monetary
Policy Reports
Monthly UBA
meetings
Monetary
Policy
Statements
Radio/TV Talk
Shows
4/8/2015 11

12. Form & Content: The Announcement
0900HRS
MPC meeting. The
second working day
following the release
of CPI by UBoS.
Research Department
makes a presentation
with a proposal
0945HRS
MPC discusses/debates
the proposal
1145HRS Agreement on
the Statement
1200HRS
Members of the
Press Arrive
1245HRS
More detailed media
engagement by Executive
Director Research
1215HRS
Press Briefing: Reading the
Monetary Policy
Statement; Announcing the
Central Bank Rate. Q & A
1600HRS Invite the
press the day
before

13. Form & Content: Purpose of Monetary Policy
Statement
Inform the target audience of the decision
Explain to them the decision is consistent with the
monetary policy objective of the Central Bank
Distribution: Verbatim in newspapers, Bank of
Uganda Website
Feedback & Evaluation: Monitor reaction
throughout the week right from the first day –
Reuters, Bloomberg, daily newspapers, Media
Enquiries, Social Media.
4/8/2015 13

14. Form & Content: Monetary Policy Statement
Structure
Content Section
1s1st Developments of Inflation
Inflation Outcome
Undying, Core, Underlying,
Core, Food Crop
2nd Output growth
Credit aggregates
Global and Domestic, State of
aggregate demand: Stimulate
or Curtail
3rd Basis for the Monetary Policy Stance
Inflation and growth Outlook What i s
expected in future
Exchange Rate , Current
Account, Balance of Payment
4th End up with the policy statement
announcement Monetary Policy Stance
CBR, Rediscount, Bank Rate
14

15. Form and Content: Uganda Bankers’ Meeting
• Monthly Uganda Bankers’ Association
meeting – usually shortly after the MPC
meeting.
• Chaired by the Governor
• Participants: All CEO’s of commercial banks
• Executive Director Research makes a detailed
presentation of the Monetary Policy Report.
4/8/2015 15

16. Form & Content: Monetary Policy Report
• Reviews prevailing situation
4/8/2015 16
Section Content
Global Developments &
Prospects
Implications on domestic
monetary policy
Domestic developments Review performance of
previous monetary policy
stance
Inflation developments &
forecasts
Policy implications
Aggregate demand analysis Curtail or Stimulate
Detailed analysis of economic
growth forecasts
Subdued, Increased
Basis for new monetary policy
stance
Neutral, Expansive, Tight
Distribution:
Posted on
the Bank of
Uganda
Website

17. Form & Content: Website, Social Media
4/8/2015 17
Most Prolific Twitter
Users in Africa
Bank of Uganda
(765)
South Africa Reserve
Bank
(707)
Central Bank of Kenya
(159)
Source: Central Banking
Publications , May 2013
Additional means of reaching
people and directing them to
www.bou.or.ug
The Website
Statements
Reports

18. Form & Content: Tailored Illustrations
• CBR & High Interest Rates
4/8/2015 18
Audience Tailored Form Tailored Content
Traders & Business Community Seminars Cause of high interest
rates
Members of Parliament Speeches /Engagements Context of inflation
Professionals/Elite OP-Eds in newspapers:
Governor
Deputy Governor
Ex. Director Research
Asst. Dir. Communications
Temporary situation
Detailed explanation
Policy Limitations
Relationships among
policy rates
General Public Radio Talk Shows:
Both Luganda & English
EDR giving detailed
explanations
Commercial Banks Monthly UBA Meetings Discussions
Media Press Conferences Regular & detailed
engagements

19. Form & Content: Challenges
Lack
• Low levels of business journalism
• Little understanding of the demand management concept; Private Investments;
Gov’t Spending; Exports
of
• Lack of understanding of BoU’s role amidst a liberalised environment
• Differentiating between monetary and fiscal policy
Informed
• Relationship between interest rates, exchange rate and inflation
• Limited knowledge of what macroeconomic policy can and cannot do
Debate
• Paucity of independent institutions which can contribute to informed analysis,
forecast, etc.
4/8/2015 19

20. Form & Content: Solving Challenges
Dual Role Informing
Building monetary
policy communication
capacity
ITL
Framework
Convincing public of
most likely outcome
over time horizon of
monetary policy
Convincing public the
interest decision is the
best one to achieve
policy target
Tough
Times
Some want low interest
rates & inflation as well
as strong shilling. People
have unrealistic
expectations
Dep. Gov wrote an
article addressing this in
a national daily
4/8/2015 20

21. Form & Content: Some Initiatives
Annual Monetary Policy Fact Sheets: Internal and
External publication for guests and for induction
Broadcast press conferences live
(internet, live streaming on websiteTV &
radio)
Public Monetary
Forums
Introduce Monetary
Policy School /
University Challenges
(in use in South Africa)
Record press
conferences and
post on website
4/8/2015 21

22. Form & Content: More Initiatives
 For effective monetary policy communication, we are
considering five more initiatives:
1. Use local languages more
2. Concerted and continuous media training
3. Continuous public awareness initiatives
4. Re-positioning the website
5. ITL ushered us into a new era, requiring a more complex
approach to communication
 We should not be afraid of debate; we should stimulate
public debate.
4/8/2015 22

23. Way Forward: Key Guidelines
 Anchoring Expectations
Recently Bank of England and European Central
Bank both adopted Forward Guidance.
4/8/2015 23
Central banks
have
experimented
with ‘forward
guidance’ –
sending
signals about
the future path
of interest rate
policy more
than just one
decision ahead
– as a way of
stabilizing
medium-to-
longer run
expectations.
Michael
Woodford
Use of metaphors to make the communication
simple, clear , understandable and effective e.g.
Treatment of malaria.
Audience Segmentation for effective tailoring of
form and content.

24. Conclusion
 The introduction of CBR, which is a visible policy
rate, has done a lot to raise the profile of
monetary policy in the press.
4/8/2015 24
Mark Carney
Has replaced Mervyn King,
as BoE Governor. Imported
new communications
practices. Brought advisers
from Canada.
Financial Times Mon July 1,
2013
Communication is integral to effectiveness and the
Communications Department is now involved in a
way not conceivable during the monetary aggregate
regime.
Effective Communication does not guarantee
effective monetary policy, but effective monetary
policy cannot be guaranteed without effective
communication.