Only about one in ten consumers heard about the European Central Bank’s new inflation target in the months after its 2021 announcement, the central bank said.
Most who learned about the target received the information through television, radio and newspapers rather than directly from the central bank, Philip R. Lane said. The ECB published his speech, “The science and practice of monetary policy communication: the ECB experience”, on Nov. 10.
Lane said reaching households presents different challenges from communicating with financial markets because most consumers do not closely follow central bank messages. Those who encounter them may interpret their implications differently from professional analysts.
He said research presented in the central bank’s 2021 monetary policy strategy review showed the limited reach of its target announcement. Separate consumer survey evidence on information channels included observations through August 2026.
Lane said attention to inflation changes with economic conditions: households and companies pay more attention when prices rise quickly and less when inflation stays low and stable. Their expectations influence wage demands, price decisions, spending and saving.
Higher attention does not necessarily mean a stronger response to messages, he said. Households may respond less to information they already know, requiring explanations that fit the economic environment.
Research on financial markets found that communication between policy meetings can change interest rates across different borrowing periods, Lane said. Its cumulative effect can match that of policy announcements, particularly for longer borrowing periods.
That research examined thousands of speeches, interviews, hearings and other events, using data from January 2004 to October 2023. Lane said communication between meetings can help markets anticipate policy changes, particularly before interest rate increases.
Other ECB research used large language models, artificial intelligence systems that interpret text, to measure the tone of policy communication, Lane said. The measures tracked shifts towards tighter or easier policy alongside changes in the central bank’s deposit rate.
The tone measures used averages of the latest 30 texts, covering Jan. 14, 2001, to Oct. 26, 2026. A separate analysis covering Jan. 1, 2001, to Aug. 13, 2026, found that policy messages placed more weight on inflation than economic activity.
Information drawn from policy statements also improved forecasts several quarters ahead for euro area core inflation, a measure excluding food and energy, Lane said. The improvement remained after accounting for staff forecasts.
Lane said the artificial intelligence tools require careful checks because their results depend on how researchers phrase questions and which training data they use. He said communication needs to reach households during low inflation and offer clear, relevant explanations when inflation attracts greater attention.
