A monetary policymaker of the Bank of Korea on Friday underlined the need for “simple” and “direct” communication when the central bank tries to send signals to the market on its future policy directions.
Park Ki-young, one of the BOK’s seven-member monetary policy board that determines the key policy interest rate, also raised the need for more research for the central bank’s effective communication with market participants.
“Such practical restrictions as the public’s inattention, information rigidity of depending excessively on past data, the possibility of misunderstanding and erred gauge of inflation expectations could undercut the impact of forward guidance,” he said during a lecture in Seoul.
“Central banks’ communication can be effective when it is simple, direct and through an information campaign,” he added.
Park said it is necessary to build infrastructure by taking into account domestic economic environment, and accumulate experience related to communication and carry out relevant research.
Citing recent research results, he also draw attention to the importance of “soft information” that could be delivered in top officials’ facial expressions, voice tones and other non-language tools that could have a “meaningful” impact on financial markets.