Central banks must talk to public to build trust, says Boc’s Macklem

Central banks must explain their actions clearly to the people they serve to preserve public confidence amid a flood of misinformation during the coronavirus crisis, the head of the Bank of Canada said on Thursday.

These efforts will be essential as central banks tackle the impact of structural changes to global economies arising from the pandemic, Bank of Canada governor Tiff Macklem said to a panel at the U.S. Federal Reserve’s annual summer symposium. “While the internet and social media have vastly broadened access to information, they are also awash with misinformation, echo chambers and conspiracy theories — often pushed by bots and trolls, sometimes for nefarious purposes,” Macklem said.

“It is more important — yet harder — for central banks to be trusted sources of information and analysis,” he said, adding that central banks must “engage with the public to explain how our actions serve our economy-wide objectives.”

Central banks around the world took unprecedented action in response to the COVID-19 crisis. The use of unconventional monetary policy tools, alongside the extraordinary fiscal stimulus, has challenged public perceptions of their operational independence, said Macklem.

“The independence that is vital for central banks and public perceptions of that independence are under threat in many countries,” he added.

To counter that, central bankers must communicate clearly and directly with the public and listen to their input, he said. The Bank of Canada on Monday said it would seek public input for the first time on its inflation target.

Macklem pointed to the fallout of 2008, when global banks were bailed out — and homeowners weren’t, which contributed to a decline in trust in public institutions and the rise in political populism.