The International Monetary Fund (IMF) has called for a rethink of disclosure practices among central banks, with the recent spate of aggressive monetary policy tightening in advanced economies stoking distrust in the general community.
“Economic and financial turbulence calls for greater transparency from policymakers. As central banks raise interest rates to curb inflation, stakeholders increase their scrutiny,” the IMF noted in a recent publication.
The IMF referenced some calls for policymakers to “reign in” the autonomy of central banks, with stakeholders concerned of the impact of rapid interest rate increases on households.
This has included recent calls from Australia for the federal government to overturn decisions of the Reserve Bank of Australia.
“To maintain public trust, safeguard independence, and enhance policy effectiveness in the face of such challenges, monetary authorities must focus on transparency and accountability,” the international financial system watchdog added.
The IMF announced plans to build on existing transparency guidance offered to central banks, including the Voluntary Central Bank Transparency Code introduced in 2020, which allows central banks and their stakeholders to map transparency practices to international best practices.
The code is underpinned by five principles — governance, policies, operations, outcome of those policies and operations, and official relations with government and other agencies.
The principles are designed to offer high-level guidance, while the practices aim to provide three levels of detailed transparency practices — core, expanded, and comprehensive.
Building on this would include making IMF transparency reviews available to all members, and developing a “repository of transparency practices”, based on information collected from the reviews.
“The new tool will help reinforce trust in central banks, as well as their credibility and effectiveness in an increasingly complex world,” the IMF concluded.
In Australia, trust in the RBA and its leadership has eroded in recent years, particularly after governor Philip Lowe’s previous assurances of prolonged interest rate stability were prematurely undone by 10 consecutive hikes to the cash rate.
This prompted calls for the governor to resign and for the government not to renew his tenure following the expiry of his term later this year.
The RBA was also subject to a review and parliamentary scrutiny regarding its previous communications and its continued monetary policy strategy.
The Commonwealth government has repeatedly distanced itself from the RBA’s monetary policy strategy, stressing the independence of the central bank amid growing community backlash.