ECB communication with the wider public

Prepared by Marius Gardt, Siria Angino, Simon Mee, Gabriel Glöckler

Published as part of the ECB Economic Bulletin, Issue 8/2021.

1 Introduction

Central banks across the world have stepped up their efforts to communicate more effectively and reach wider audiences. With the rise of central bank independence in recent decades, central banks have become more transparent and are working harder to make themselves understood.^[1] Furthermore, the wider set of tools that central banks have used and additional tasks entrusted to them since the global financial crisis have called for better explanations of what central banks do and why. Central banks have also made communication a core part of their monetary policy toolkit with the introduction of forward guidance. While central banks used to primarily address their communication to expert audiences, such as financial market participants, recently they have been making more of an effort to reach out to the non-expert wider public.

Central bank communication is important for the effectiveness of monetary policy because it can influence the expectations of market participants, firms, and consumers. For central banks to influence inflation expectations effectively, the wider public – defined here as the general, non-expert public and representative professional bodies such as employers’ groups, trade unions, political groups, etc. – needs to be aware of central banks’ messages and understand them. At the same time, attracting people’s attention and reducing the complexity of central bank communication in an effective manner is challenging.

With the recent evolution in central banking, the ECB has revisited its communication practices. To account for significant shifts in the communication landscape and the clear demand from the wider public to make ECB communication more accessible, the ECB decided – as a result of its recent strategy review – to modernise its monetary policy communication and make “listening” a regular feature of its communication.^[2]

This article examines the ECB’s communication with the wider public. It starts from the premise that communication is a process that involves a “sending end” – the central bank – and a “receiving end”, i.e. different audiences, ranging from experts to the wider public. For communication to work effectively, both ends, as well as the link between the two, need to be well understood. By shedding light on this process, this article builds upon the analysis conducted as part of the ECB’s strategy review, notably by the Work stream on monetary policy communications.^[3] It also provides a first assessment of efforts to modernise ECB communication following the strategy review’s conclusion.

2 The “receiving end” of central bank communication

The ECB faces various challenges in its efforts to “get through” to the wider public. First, as a supranational central bank, the ECB finds itself in a challenging position in that it speaks to diverse audiences across 19 Member States. Financial literacy levels, inflation expectations and trust in the ECB vary across and within euro area countries. ECB communication needs to take this plurality into account. Second, the ECB – like other central banks – has to overcome the challenge of people’s inattention to its messages.^[4] The complexity of central bank communication and low levels of financial literacy, among other factors, can make it too “costly” for people to pay attention to what central banks say.^[5] Another challenge is that trust in the ECB, which declined significantly during the global financial crisis, is only slowly recovering to previous levels. Analysing the determinants of public trust in the ECB can help us understand if and how the ECB can build trust.

One central bank, many diverse audiences

When reaching out to the wider public, the ECB needs to consider the diversity of those who are at the receiving end of central bank communication. Compared with other major central banks, the ECB stands out in terms of the linguistic diversity of its audience. It communicates in 24 languages to an audience made up of 340 million citizens, spread across 19 Member States. Besides language diversity, ECB communication also needs to account for different financial literacy levels across countries (Chart 1)^[6] and the heterogeneity of inflation expectations among the wider public (Chart 2). Results from the ECB Consumer Expectations Survey (CES) indicate that inflation expectations are higher for female consumers than male consumers, increase with age and decrease with a high level of financial literacy and income.^[7]

The wider public’s interest in ECB-related themes also varies widely, though its main interest lies in monetary policy. Taking media coverage as a proxy for public preferences and interests,^[8] Chart 3 shows commonalities across countries, but also indicates important differences across the euro area.^[9] ECB-related coverage focuses mostly on monetary policy, but there are significant cross-country differences, depending on the topic. For example, in Italy and Spain, interest in banking supervision topics is much higher than in countries such as Germany or the Netherlands, while discussion about the ECB’s mandate and accountability – under the category Governance – is more common in Germany and France than in the other countries in the sample.

There are also significant variations in the relative importance of the channels through which the public receives news about the ECB. Data from the Knowledge & Attitudes (K&A) survey^[10] from May 2021 show that television (81%) is the most popular source of information about the ECB (Chart 4).^[11] Printed press is the second most popular source, followed by online press, radio and information received through people’s social circles. Relatively few people receive their news about the ECB on social media. The most popular of the social media channels is Facebook (14%), followed by Twitter and LinkedIn. At the same time, these figures mask country-level differences, which are shown in Chart 5.

Against this background, efforts to tailor communication to specific needs, interests, local debates and media consumption habits can help the ECB get its messages through to different audiences more effectively. For example, the results of the analyses highlight that the ECB needs to take different inflation expectations and financial literacy levels into account when designing its communication. At the same time, the nature of central bank communication calls for consistent messaging.^[12]

Mind the gap: awareness, interest and knowledge

Communication should be designed around solid evidence about how people view the ECB. Are they aware of the ECB? Do people know about the ECB’s tasks and objectives? Do they care? Are they interested in learning more about the ECB?

Data reveal a gap between euro area citizens’ awareness of the ECB on the one hand, and their interest in and knowledge of the ECB on the other. As Chart 6 shows, while awareness is high, interest and knowledge are relatively low. According to May 2021 K&A data, 87% of respondents have heard of the ECB. However, the majority of citizens (55%) are not interested in the ECB and its policies, with 27% of people not interested at all. Only 11% of respondents say they are very interested. Similarly, respondents’ self-assessment of their knowledge about the ECB’s tasks and objectives is low: on a scale of 1-10, respondents on average rate their own knowledge at 4.1. Only 3% rate their knowledge as very good (9-10), while 31% say it is very bad (1-2).

Confusion about the ECB’s tasks seems to be widespread. K&A data indicate that when respondents pick from a list of possible tasks and objectives of the ECB, they often select topics that are beyond the ECB’s mandate (Chart 7). While 64% state that the ECB should “keep inflation at bay”, 66% also believe it is the ECB’s task to “stabilise the foreign exchange rate”, while 39% indicate that the ECB’s job is to “finance governments”.

These data underscore the need for the ECB to close the gap between high levels of awareness and lower levels of interest and knowledge. As research shows, possible ways to overcome inattention are to make ECB communication not just simpler but also more engaging.^[13] Central bank communication that is both understandable and effective in generating interest and increases knowledge among the wider public matters when it comes to accountability and trust.^[14]

Proximity to the different audiences across the euro area is instrumental in adapting communication to local audiences and making it more effective. In this context, national central banks play a key role in connecting and engaging with diverse national audiences across the euro area and in helping to explain ECB decisions and the rationale behind them. They can reach out to people in their local language, and might have an informational advantage when it comes to the topics that resonate with citizens in the different countries and the channels they can best use to keep citizens informed. Effective and successful communication with the wider public is therefore something the entire Eurosystem must work together to achieve.

Public trust in the ECB

Public trust in the ECB is an essential prerequisite for it to deliver on its mandate of maintaining price stability. Various studies have analysed how trust in central banks can influence the formation of people’s inflation expectations.^[15] While greater trust in the ECB can anchor better public inflation expectations around the central bank’s target,^[16] low levels of trust in the ECB may play a part in leading inflation expectations away from the central bank’s defined price stability target, which could undermine the ECB’s ability to deliver on its mandate.^[17] Trust in an institution like the ECB has many different facets and determinants, and the processes for building trust are multi-dimensional. Some of those aspects can be influenced by the ECB itself, while others lie beyond its reach.

What determines trust

A first and decisive factor that determines trust in the ECB – and one that is at least partially under the central bank’s own control – relates to people’s perception of its performance and of its leading personnel. Recent K&A data show that the association between specific perceptions of the ECB and trust in it is strong (see Chart 8). Two relevant dimensions of trust in the ECB emerge.^[18] One dimension relates to the ECB’s competence – is the ECB able to successfully deliver on its mandate, and is it credible? – which is most tightly linked to trust.^[19] There is, however, also an ethical dimension: does the ECB care about its citizens and does it act responsibly?

To foster trust, the ECB not only needs to be successful in its policy performance, but also needs to show how its measures ultimately serve the people of Europe. Success at delivering price stability is an essential component of building trust among the wider public. However, by narrowly focusing on its policy performance in its communications, the ECB may miss out on important aspects of how people perceive it. Framing communication also in terms of how responsible ECB policy actually benefits people’s welfare – in other words, how it makes a positive contribution to people’s individual lives – can capture these additional dimensions and foster greater trust.

Beyond that, trust in the ECB is also determined – possibly more decisively, even – by a wide range of economic and non-economic factors. There are various studies linking trust in public institutions to economic conditions. With respect to the ECB, research shows that the public often holds the ECB responsible for macroeconomic conditions such as unemployment and stagnation, or crisis management on the part of EU institutions.^[20] Besides the relevance of the perceived state of the economy, trust in the ECB depends on citizens’ satisfaction with the performance of the EU as a whole, which again differs across countries.^[21] In that sense, these factors are at best indirectly related to the ECB and its performance, if not entirely exogenous.

Among non-economic determinants of trust, there is evidence that cultural and sociological factors also matter. Chart 9 shows the link between cultural traits, measured by social trust – that is, generally speaking, “faith in people”^[22] – at the regional level in the euro area, and trust in the ECB. Individuals living in regions with lower levels of social trust systematically exhibit less trust in the ECB, and the underlying analysis supports a causal interpretation.^[23] Clearly, these cultural and sociological factors are slow-moving components, and the scope for the ECB to influence them is limited.^[24]

Ways of building trust

Given the importance of trust for central banks, it is essential to have a deeper understanding of how public trust can be built and sustained. In this context, important societal shifts with respect to how trust is generated and lost are of great relevance for the ECB.^[25] However, there is ample literature that confirms that by communicating in an accessible manner^[26] and by engaging with citizens^[27], central banks can build knowledge, increase understanding and ultimately affect people’s trust in them. Two key mechanisms can be distinguished: “reflective trust”, which builds on greater understanding as a stepping stone towards increased trust; and “instinctive trust”, which builds more on emotion and personal experience and generates trust in the institution even in the absence of a clear understanding of its role or policy.^[28]

A survey experiment conducted with K&A survey data highlights differences between reflective and instinctive trust levels in the ECB. In the survey experiment (Chart 10), respondents were randomly asked to answer the question “Do you tend to trust or tend not to trust the ECB?” either at the beginning of the questionnaire, in the middle of it, or at the end. The randomisation made it possible to check whether deeper consideration of the ECB – that is, “reflective trust” – promotes more or less trust in the institution compared with an on-the-spot judgement – “instinctive trust”.

For the ECB it is important not to rely on instinctive trust alone but also strengthen reflective trust levels. The survey experiment shows that instinctive trust is fragile, especially for certain socio-demographic groups. When respondents had the opportunity to reflect about the ECB, the level of trust decreased for some of them. Mainly women then tend to trust the ECB less, in particular those who claim to know little about the institution. These findings suggest that for trust levels to remain steady even in times of crisis, the ECB should try and increase reflective trust levels. One way to do that could be to help improve people’s factual and self-assessed knowledge of the ECB’s tasks and objectives.

3 Analysing the “sending end” of central bank communication

Evolution of ECB communication

For central banks, communication via press conferences, speeches and interviews is a well-established means of reaching expert audiences as well as the interested, highly-educated public. As communication gains importance for central bank policy and its effectiveness, recourse to this type of communication has grown considerably. For example, Chart 11 shows the increase in the number interviews given by ECB Executive Board members over time. The increase mainly reflects the efforts made by the central bank to explain its increasingly complex policies during times of crisis and to reduce uncertainty. During the pandemic, media interviews given to both financial and general-interest media provided a suitable platform for sharing the ECB’s messages.

Quantity alone, however, is no guarantee of more media coverage and, by extension, a greater chance of “getting through” to the wider public. To increase its voice in traditional media and social media, the ECB needs to focus on communicating simpler messages.^[29] While stepping up communication, especially in times of crisis, is relevant in terms of ensuring accountability and legitimacy, the clarity of the central bank’s messages matters for its reach. Chart 12 shows that clear communication in ECB speeches is a significant and robust predictor of media engagement. This also holds true for ECB communication on Twitter and via its press conferences.^[30]

While the readability of ECB speeches has improved over time, the challenge of conveying messages in a simple, but not simplistic, way remains difficult, especially in times of crisis. Chart 13 shows that the readability of ECB speeches has generally improved since the launch of the euro, especially in the aftermath of the global financial crisis. At the same time, the pandemic and the policy response to it has led to more complex and complicated packages of measures, which is also reflected in the complexity of speeches, as is shown by the uptick in the readability score over the year 2020. The challenge for the future will be to return to the pre-pandemic downward trend when it comes to the complexity of communication activities.

The ECB has adapted its communication strategy to “new” communication platforms and technologies. Citizens, especially younger people, increasingly consume news on online platforms.^[31] As a consequence, the ECB has expanded its activities on social media platforms. The ECB is now present on Twitter, LinkedIn, Instagram and YouTube with a combined followership of over a million.^[32] While this number can still be considered modest given the size of the ECB’s audience, the ECB’s social media channels have already proved to be important platforms for reaching the wider public, as outlined in Box 1 below.

Modernising ECB communication

Big economic, societal, and technological changes that are shaping a radically altered communications landscape are inevitably driving a further evolution in ECB communication. These trends include a loss of trust in expert authority^[34], a 24-hour news cycle and greater controversy around and politicisation of central bank actions.^[35] Moreover, as outlined in Chapter 2, more concerted engagement efforts are necessary to build knowledge and ultimately trust. To that end, the ECB’s Governing Council decided, in the context of its recent strategy review, to adapt the substance, style and operational model of its monetary policy communication.

The Governing Council has made its monetary policy communication more accessible by replacing its “introductory statement” with the new “monetary policy statement”, which is more streamlined and has a stronger narrative. Chart 14 shows how the length and complexity of monetary policy statements issued before the strategy review had concluded compare with those issued after the strategy review outcome measures had been implemented. Chart 15 shows the length and complexity of monetary policy communication over time, indicating that recent monetary policy statements are more accessible than previous ones.^[36]

In addition, the Governing Council decided to complement its monetary policy communication with “layered” communication, which relays the same core information in a more accessible and visual way. Research indicates that accessible, visualised and relatable monetary policy communication improves public comprehension and also trust.^[37] Applying these findings to the ECB’s monetary policy communication, a new visual monetary policy statement was added to explain the ECB’s latest decision in a more attractive and simpler format, and in all 24 official EU languages. Using storytelling techniques, relatable visuals and language, the visual monetary policy statement aims to make the ECB’s policy decisions more accessible to non-expert audiences across the entire euro area. ^[38]

As a result of the strategy review the Governing Council also decided to make outreach events a structural feature of its interaction with the wider public.^[39] These outreach events build upon the positive experiences of the Eurosystem’s “listening” events, involving academics, civil society organisations and the wider public, which took place during the strategy review. Via the “ECB Listens Portal” alone, the ECB received about 4,000 responses.^[40] The views, suggestions and concerns received during these events formed a key input into the Governing Council’s decision to modernise the ECB’s monetary policy communication.

4 Conclusion

Central bank communication with expert audiences and the wider public plays an important role in influencing expectations and sustaining trust, thereby making monetary policy more effective and helping to ensure the legitimacy of independent monetary institutions. To ensure the effectiveness of the ECB’s monetary policy, clear and consistent communication targeted at expert audiences will remain essential. At the same time, greater efforts to “get through” to the wider public will help increase the impact of the ECB’s monetary policy communication.

This article has examined the receiving and sending ends of the ECB’s communication with the wider public, and the elements that facilitate communication between those two ends. The analysis highlighted the sheer diversity of the ECB’s audience and made the case that ECB communication needs to be adjusted accordingly. Research suggests that more accessible, relatable and visual communication can increase the impact of the central bank’s messages.

The strategy review’s outcome has led to the introduction of more understandable, relatable and visual monetary policy communication. This article has shown that the readability of the ECB’s new “monetary policy statement” is noticeably better than the “introductory statement” that preceded it. In turn, the visual monetary policy statement introduces a layer of more accessible communication that allows the ECB to better reach the wider public.