OTTAWA (Reuters) - 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 have slashed interest rates and turned to unconventional monetary policy tools to deal with the COVID-19 crisis. Those actions, taken alongside extraordinary fiscal stimulus, is challenging public perceptions of their operational independence, Macklem said.
At the same time, trust in public institutions has declined since the 2008 financial crisis and there has been a rise in political populism, he said.
To counter these trends, central bankers must speak plainly to the public, and listen to their input, Macklem said. The Bank of Canada on Monday said it would seek public input for the first time on its inflation target.
“The stakes are high, and this opportunity should not be missed,” he said.
Macklem later told the panel that while Canada is seeing impressive rebound numbers from the depths of the crisis, not all small and medium enterprises will survive, with restaurants and hospitality businesses particularly hard hit.
“We expect after this first phase, it’s going to be a pretty long, bumpy phase,” he said.
Reporting by Julie Gordon and Kelsey Johnson in Ottawa; additional reporting by Dan Burns in New York; Editing by Lisa Shumaker and Aurora Ellis
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