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Monetary policy in a changing world

Swiss Society for Financial Market Research, Zurich, 7 April 2000, 07.04.2000

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These are good times for central banks. The return to price stability achieved in the nineties has had a positive effect on their reputation and their standing. The marked disinflation was facilitated by two institutional changes. The banks' mandate became focused on price stability, and in fulfilling this mandate, numerous central banks are more independent of their governments than formerly. This goes hand in hand with significantly higher demands with respect to transparency and accountability.

Changes were also necessary in the implementation of policy. In several countries money supply steering was replaced by inflation targeting with operational interest rate targets. The current discussion is centred on two main topics: on the one hand, the relevance of the so-called new economy for monetary policy, on the other hand, the significance of spectacular asset price changes for central bank policies.