Have central banks opened up due to the increased openness of the authorities or the developments of new media? This is not the case. Openness was a response to unprecedented shocks that has helped to withstand such shocks when traditional tools have turned out to be ineffective.
The more clearly businesses and households understand the central bank's policy, the closer their inflation expectations are to the target. However, it is possible for monetary policy to be excessively transparent, which can bring more harm than benefit.
Negative news in the media covering the overall economic situation may act as a meaningful predictor of the dynamics of Russians’ inflation expectations and their current inflation perceptions. These are most driven by news about the ruble exchange rate and economic crisis.
A central bank may have an information advantage enabling it to better forecast macroeconomic indicators and, hence, make decisions that are not expected by the market. This advantage may exist both in reality and solely in the form of the market’s belief in it.
With inflation expectations anchored, price spikes do not spread between market segments, and inflation returns to the target level. We have assessed that the expectations of Russian economists have been anchored since 2017, while those of households have not yet been anchored.