Why an Interest Rate Shock Backfired on the RBA
Australia’s reforms to improve accountability are sowing confusion instead.
The RBA must improve its communication style.
Photographer: Brent Lewin/BloombergCommunication has been a basic tool of central banking for decades, but it can be a tricky thing to get right. Merely fronting the microphones doesn't deliver superior results. The message sent has to be clear — and received. The Reserve Bank of Australia needs to do much better.
The authority’s decision to forgo a widely anticipated interest-rate cut this month left much to be desired, and the RBA’s explanations for why it wrong-footed investors have been subpar. Press conferences and the signaling of intent through speeches aren’t sidelines. No lesser person than Ben Bernanke, a Nobel laureate and former Federal Reserve chair, observed that successful policy was 98% talk and 2% action.