This, he said, would involve the deepening of understanding of economic relationships and their ultimate impact on inflation, and signalling monetary policy actions, which provided forward guidance to market participants.

Dr Asiama was speaking at a three-day Association of African Central Banks’ continental seminar in Accra on the theme: “Credible Communication Strategies for Central Banks in the Framework of Monetary Policy and Financial Stability.”He said forward-looking monetary policies could only be effective if the central bank was able to shape inflation expectations of the public to align with the medium term inflation target.

To do this, he said, the central bank needed to be transparent with regard to the monetary policy objective and provide a clear policy direction on how to achieve it.Dr Asiama said communication and transparency helped shape and anchor inflation expectations as well as build policy credibility towards delivering the core mandate of the central bank.

“Monetary policy credibility is crucial for attaining monetary policy objectives, particularly, in a rational expectations environment where economic agents have full information on how the economy works,” he said. “It is for these reasons that communication has become an additional tool in the kitty of the central banker.

“In several instances, central banks communicate interest rate policy decisions, risk assessments of inflation horizon and changes in inflation forecasts relative to the actual outturns,” he added.Dr Asiama said there was the need for as central bankers to appreciate new communication trends and develop communication strategies to leverage existing media technology to build confidence of market players.

African central banks should also develop a framework for comprehensive education packages to improve financial literacy across all the sectors of the economy, he said.He said it would enhance market appreciation of monetary policy decisions and central bank actions for appropriate response.

He said, there was a potential for central bank actions and inactions to be misrepresented and in the process, erode the bank’s reputation and lower market and public confidence in monetary policy decisions in the face of media pluralism and the explosion of social media.

Dr Asiama said in the case of financial stability, central bank communication strategy should be developed with utmost care in order not to incite unnecessary and unintended reaction from the market.There is therefore the need to maintain a delicate balance between transparency and accountability on one hand, and the probability that the information being communicated could unsettle markets.

“A transparent and credible communication strategy is feasible in a context of a stable market underpinned by effective regulatory and supervision regime,” he added.Dr Asiama urged the participants to take the seminar seriously and deepen their understanding of central bank communication and monetary policy credibility. On this note, let me once again thank the Executive Secretariat and the Planning Committee for putting this seminar together.