Evolving Monetary Policy Communication: Evidence from the South African Context

This article reviews changes in communications at the South African Reserve Bank since the adoption of inflation targeting in February 2000. In particular, it examines the shift towards evolving methods of communication by the South African Reserve Bank through the use of new technologies and approaches intended to increase accountability and transparency. The analysis extensively evaluates the South African Reserve Bank’s communication tools and how they affect the effectiveness of monetary policy implementation in the South African context. Notably, this study employs the Flesch-Kincaid Grade Level metric to assess the effect of communication readability on domestic inflation expectations. By using readability scores as a proxy for clarity, the research measures the impact that central bank communication standards have on market agents’ inflation expectations and their interpretation of monetary policy. The findings reveal that the South African Reserve Bank’s communication clarity has a significant inverse relationship with South African market participants’ long-run inflation expectations, highlighting the vital role of clear central bank communication in anchoring inflation expectations.