Monetary policy under inflation targeting

On the 01 December 2000, Eugenio Domingo Solans, Member of the Governing Council and the Executive Board of the European Central Bank, made a speech at the Fourth Annual Conference of Banco Central de Chile in Santiago de Chile.

In his speech, he spoke about inflation and the strategy of the European Union to control it. He especially dealt with the inflation targeting policy.

He also reminded that politicians want central banks to be transparent and accountable. Market players want central banks to be transparent and fully predictable. But both politicians and market players were not fully aware of the complexities of monetary policy making. Our obligation as central bankers was to make them understand that what was even more important than transparency, accountability and predictability is honesty and that, honestly speaking, a monetary policy strategy should be above all effective. Inflation targeting was not the most effective strategy under the present circumstances, unless we interpreted this label in such a flexible way that it can almost accommodate any practice.

ESO: Key Source: Relations between Chile and the European Union http://www.europeansources.info/record/relations-between-chile-and-the-european-union/

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