New research from the Federal Reserve indicates that central-bank credibility is a key element in maintaining economic stability. The study found that consistent communication and transparency are vital for fostering trust with the public. Researchers observed that when central banks appear independent and trustworthy, markets generally react more favorably to policy changes. The research suggests that a lack of clarity or perceived inconsistency can lead to market instability. It highlights the importance of public trust in effective economic management for central banks.
Credits: Finance & economics