ACCRA, The Second Deputy Governor of the Bank of Ghana, Dr Johnson Asiama, has stressed that effective central bank communication must be underscored by accountability and transparency.

This, he said here Wednesday, 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' seminar on 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 and in order to do this, the central bank needed to be transparent with regard to the monetary policy objective and to 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 added.

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."

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. They should also develop a framework for comprehensive education packages to improve financial literacy across all the sectors of the economy.