You Have to Go to College to Understand the Bank of Israel

(Bloomberg) -- You probably need a college education to decipher the Bank of Israel’s interest rate announcements.

That’s the bank’s conclusion after studying more than a decade of its English-language rate announcements to determine how accessible they are to readers.

Central banks worldwide have been trying for years to make their monetary policies more transparent in order to improve financial stability by reducing “surprises” and market overreaction to decisions. In recent years, with the interest rate close to zero, “forward guidance” regarding borrowing costs is also being used as a monetary tool; its efficiency depends largely on how clear the message is.

After studying its announcements between 2007 and 2018, the Bank of Israel concluded that it would take an average of 14 years of schooling in the U.S. to understand them. A complexity level that is too low, however, “will make it very difficult to properly deliver technical and professional messages,” the researchers said.

While the Bank of Israel’s announcements may not be easy reading, the Fed’s and ECB’s are even more complicated, they noted. The Fed’s require an average of about 17 years of schooling, and the ECB’s, 19. So a college education isn’t enough for these -- you’d probably have to go to graduate school.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net, Amy Teibel, Mark Williams

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