Are any surprises to be expected from a central bank?

Jean-Pierre Roth, Chairman of the Governing Board

Economic and statistical society, Basel, 25 March 2002, 25.03.2002

Monetary policy has become increasingly transparent around the world in recent years. Transparency helps the markets to better anticipate and understand the actions of a central bank. Surprises are thus generally ruled out.

There are several reasons in favour of transparency in monetary policy. First, transparency makes it possible to implement monetary policy more rapidly and more precisely, the reason for this being that monetary policy impacts mainly via the expectations of market participants. Transparency permits a central bank to influence these expectations more rapidly and more precisely in keeping with its own wishes. Furthermore, transparency makes it possible to avoid unnecessary market volatility and to increase the flexibility of the central bank.

Transparency is also a precondition for fulfilling reporting requirements. In a democracy, independence implies accountability, a condition that can only be fulfilled if facts become transparent. Transparency affords the best protection against attacks on a central bank's independence.