Did Australia invent central bank transparency?

On a recent visit to Australia, I was told that the Reserve Bank of Australia was the first central bank to ever issue a press release announcing a change in monetary policy. That first statement came out on January 23, 1990, a full four years before the US Federal Reserve started announcing its own monetary policy decisions. I certainly did not know this fact before, and on reviewing standard accounts of the rise of central bank transparency, it appears that many other people may also not be aware of the RBA’s trailblazing. Here is one often-cited paper by Alan Blinder et al. from 2008:

Alan Greenspan, who once prided himself on “mumbling with great incoherence,” was by 2003 explicitly managing expectations by telling everyone that the Fed would keep the federal funds rate low “for a considerable period.” This guidance was only the latest step in what was, by then, a long march toward greater transparency that began in February 1994 when the Federal Open Market Committee (FOMC) first started announcing its decisions on the federal funds rate target. In May 1999, the FOMC began publishing an assessment of its “bias” with respect to future changes in monetary policy in its statements. It also began issuing fuller statements, even when it was not changing rates. About three years later, it began announcing FOMC votes—with names attached—immediately after each meeting. Starting in February 2005, the FOMC expedited the release of its minutes to make them available before the subsequent FOMC meeting. And most recently, starting in November 2007, the Fed has increased the frequency and expanded the content and horizon of its publicly-released forecasts.

Other central banks have also become remarkably more transparent in the last 10-15 years and are placing much greater weight on their communications. In fact, the Fed is more of a laggard than a leader in this regard. The Reserve Bank of New Zealand and the Bank of England were early and enthusiastic converts to greater transparency, and Norges Bank (the central bank of Norway) and Sveriges Riksbank (the central bank of Sweden) may now be in the vanguard. Arguably, the European Central Bank (ECB) has been more transparent than the Fed ever since it opened its doors in 1998.

Australia is not mentioned at all in this account, which seems rather unfair. The RBA is certainly not tooting its own horn; the bank’s own website merely states, in perfectly neutral central-bank-ese:

Since January 1990, each change to monetary policy has been announced in a media release, which sets out the change in the cash rate target and the reasons for it.

That first press release from 1990 is still preserved online. It is interesting to note that the press release was issued only a day after the decision was made, and after the RBA had already acted in the market to achieve its goal:

The Governor of the Reserve Bank (Mr Bernie Fraser) confirmed that the Bank had operated in the domestic money market this morning to bring about a modest reduction in interest rates.

The Reserve Bank Board, which reviewed the case for an easing in monetary policy at its November and December meetings, agreed at a meeting yesterday that it was appropriate to be making some adjustment now.

It is a bit challenging for me to verify whether the RBA’s statement was indeed the first in the world, but the claim certainly holds up to an initial examination–I can’t find any evidence online of an earlier monetary policy statement by the Bank of England or the Reserve Bank of New Zealand, the other early adopters of transparency. That of course doesn’t definitively mean that there wasn’t one, and I would welcome information and correction from those better informed. But the Australians were certainly very early getting onto the road that has led, more recently, to “forward guidance” and “dot plots.” Perhaps that is something they do not wish to brag about…

Update. A correspondent informs me that the Reserve Bank of New Zealand made its first public monetary policy statement in March 1990, a move that was required by 1989 legislation governing the central bank. The statement lays out the central bank’s goals for monetary policy, expressed in specific targets for the CPI, although it does not explicitly announce a change in monetary policy settings. This is because the RBNZ’s target rate for monetary policy, the official cash rate or OCR, was not yet in existence (it was introduced in 1999). But the statement is in other ways perhaps more transparent than the RBA’s, being clearer about the policy goals and more detailed in its economic analysis. The RBNZ statement was also required by law, while as best I can tell the RBA’s first statement was issued at the central bank’s own discretion. So the two early statements are not exactly the same thing; in any case, the RBA beat the RBNZ to the punch by two months or so. The Aussies have it, by a nose.

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