WASHINGTON (Reuters) – The European Central Financial institution wants to enhance the way it communicates coverage intentions and uncertainty, however copying the U.S. Federal Reserve’s “dot plot” projection methodology just isn’t a fascinating choice, Bundesbank President Joachim Nagel mentioned on Tuesday.
The ECB plans to conduct a technique overview subsequent yr, and communication is about to be a key matter because the period of ahead steering is essentially over and central banks are in search of higher methods to sign their intentions.
Some policymakers have mentioned it’s value wanting on the Fed’s dot-plot strategy, the place every particular person policymaker makes their very own coverage fee projection and these are then plotted into an anonymised graph, giving the instrument its title.
Nagel, nonetheless, joined an already lengthy record of policymakers arguing towards the dot plot, saying it might jeopardize independence whereas the development within the financial institution’s signalling was not fully clear.
“I don’t see a compelling case for introducing dot plots for the Eurosystem,” Nagel mentioned in a speech at Harvard College.
The argument is that after you begin publishing dots, coverage watchers will attempt to establish particular person policymakers behind them and put stress on governors to advocate their nationwide pursuits over that of the 20-nation bloc.
“This might probably affect the Governing Council’s independence,” Nagel mentioned.
As a substitute, the ECB ought to refine its present signalling instruments and use the upcoming overview for this, Nagel argued.
“One is likely to be to reinforce the communication of our current measures of uncertainty,” Nagel mentioned. “One other is likely to be to develop new measures corresponding to state of affairs and sensitivity analyses, in addition to improved fan charts.”
