Bundesbank President Joachim Nagel discussed Tuesday the potential introduction of dot plots for the Eurosystem's monetary policy communication, expressing his skepticism about their effectiveness for the euro area.
Dot plots, used by the United States Federal Reserve, visually represent individual policymakers' interest rate projections. In a speech at Harvard University, he emphasized that introducing dot plots could undermine the independence of the Eurosystem's Governing Council by exposing members to national pressures. Instead, Nagel advocated for improving how the Eurosystem communicates uncertainty in economic forecasts.
"Once national stakeholders become aware of "their" representative's views on future interest rates, they may exert pressure on the representative to align with national interests," he noted saying he trusts that the policymakers "would continue to act independently." "However, I believe we are well advised not to put ourselves in a situation that might increase pressure on us to act in ways others want us to," he added.
