How the Bank of England reconnected the public with its purpose


Tools developed by Oxford academics have helped the Bank of England engage with a wider audience and rebuild public trust.

The research of Michael McMahon (Professor of Economics) and Stephen Hansen (Professor of Economics, formerly at the University of Oxford now of Imperial College), has assisted the bank in reconfiguring its communications and education strategies. By putting out clearer, more targeted communications, the bank has been able to reach beyond its traditional audience of financiers and economists.

This new approach has begun to restore public support for the institution, and has been emulated by other banks around the world.

Rebuilding trust

Public confidence in central banks has declined as a result of the financial crash of 2008 and is yet to fully recover. This has led to banks re-evaluating their communications strategies and thinking of new ways to approach how they engage their external audiences.

Hansen and McMahon’s research analyses the efficacy of communication in policymaking, specifically in the context of central banks. They use computational linguistic algorithms to understand communication both internally (how it affects decision-making) and externally (how it impacts financial markets and public perceptions).

Their 2018 study How Central Bank Communication Generates Market News used this method to analyse a series of Bank of England inflation reports. It found the wording used to explain the forecasts and the Monetary Policy Committee’s interpretation of the data had an impact on inflation expectations and long term interest rates. By describing the uncertainties around economic conditions, these communications were affecting market behaviour.

McMahon carried out a subsequent study in collaboration with Andy Haldane (Chief Economist, Bank of England) in 2018 to explore how central bank communications could better engage the general public. Outcomes showed that by putting out clearer communications, the Bank of England could effectively anchor perceptions of inflation and reestablish trust with its audience. These simpler, more engaging communications aided public understanding, leading to more effective monetary policy. 

A new way forwards

As a result of McMahon and Hansen’s ongoing work in this area, the Bank of England has reformulated its communications and education strategies. The bank’s new approach involves “layering” communications, with content strands designed to engage both specialist and non-specialist sections of their audience. This approach was piloted by the Bank of England and subsequently evaluated by MacMahon and Haldane, who deemed it effective in increasing public understanding and policy perception.

Policy recommendations made as a result of McMahon and Haldane’s research have led to the bank introducing an extensive schools programme, citizen’s panels, and a youth forum.

This “layering” approach to communications has since been adopted by a number of other banks around the world, including the Federal Reserve in the US and the European Central Bank (ECB). McMahon’s research has also been used by the Bank of Indonesia to help build and evaluate its credibility.

Haldane comments: “My judgement is that Michael’s research and insights on these topics have not only led him to be widely regarded as one of the world’s leading experts in these areas; they have also had a very significant impact on shaping practice, radically, within the central banking community, at the Bank of England and beyond.”