Credibility gains from central bank communication with the public

Abstract

Enhancing central bank credibility among the general public is a challenging task, not least because it is difficult to reach out to this group: even the revision of the ECB’s inflation target in 2021 went largely unnoticed by consumers. However, randomised information treatments conducted in a representative consumer survey in the six largest euro area countries reveal that communicating information about the target can enhance the perceived probability that price stability will be maintained in the medium-term. Especially if some explanation about the role of monetary policy is provided, credibility can be boosted also among the less financially literate, and the credibility gains are noticeable even in periods when inflation has increased.