People sit in the sun outside the the Royal Exchange in the City of London Jack Taylor/Getty Images

To Manage Expectations, Central Banks Need Social Media Savvy

As the global economic recovery strengthens, and central banks move to raise interest rates, they need to improve their communication with the general public. To do that, they should follow the trail blazed by Donald Trump.

LONDON – As global economic growth gathers pace, with the International Monetary Fund reporting that all of the G20 countries are now in an expansion phase, we are at last entering a process of normalization of interest rates and monetary policy. That shift has been a long time coming, and in 2008 few would have forecast that the impact of the financial crisis that erupted that year would be so durable.

It is fair to say that policy normalization is proceeding at different speeds in different places. The US Federal Reserve is furthest ahead, having already lifted rates twice, while in the Eurozone and Japan, normalization is more anticipated than experienced. But the general direction of change is clear.

In the Fed’s “Semiannual Monetary Policy Report to the Congress,” Fed Chair Janet Yellen forecast “gradual increases in the federal funds rate.” At the same time, the Fed is already reducing its holdings of US Treasury bills and mortgage bonds. In other words, so-called quantitative easing (QE) is being replaced in the US by QT, or quantitative tightening.