Central banks need to foster trust – ECB report
Instilling public confidence helps in achieving policy objectives and maintaining independence
A central bank’s most valuable currency is trust, says a new working paper from the European Central Bank. But retaining it will be increasingly challenging in an age of political polarisation, misinformation and growing disillusion in public institutions.
The research by Michael Ehrmann, published on December 17, says trust in a central bank is essential for it to successfully conduct monetary policy. Citing previous studies, Ehrmann says trust “makes disinflation less costly, helps keep
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