Communication and transparency have become more important for central banks like the ECB in recent decades, and will become even more important in the decades to come. A transparent central bank is not only more accountable, but also more effective in implementing its monetary policy. If the general public and financial markets can understand how the ECB is likely to respond in a given situation – its so-called “reaction function” – they can form reasonable expectations about future monetary policy. This in turn gives the ECB the capacity to influence interest rates at longer maturities and steer broader financial ... (full story)