Edward Robinson: Central bank communications - evolution in theory and practice Opening remarks by Mr Edward Robinson, Deputy Managing Director (Economic Policy) and Chief Economist of the Monetary Authority of Singapore, at the IMF High-Level Peer-to-Peer Forum on “Central Bank Communications in ASEAN–5 Countries: From Principles to Practice”, Singapore, 4 December 2019. * * *  1. INTRODUCTION  May I extend warmest greetings and welcome to all visitors and overseas participants. MAS is very pleased that the IMF is organising this conference on a most pertinent topic in Singapore. 2. MONETARY POLICY COMMUNICATIONS—FROM OPACITY TO TRANSPARENCY  Since the 1990s, there has been a clear trend in central banking circles towards greater transparency. This marked a significant turnaround from previous decades that prized monetary policy-making as “an arcane and esoteric art best practiced out of public view”.1 Former BOE Governor Montagu Norman (1920–1944) reputedly had a personal motto of “Never explain, never excuse.” The change has much to do with the growing recognition that monetary policy is essentially about managing expectations. The increasing adoption of inflation targeting also spurred advances on the transparency front, with its communication-heavy requirements of policy targets, forecasts and outlook. The shift towards greater transparency is generally held as desirable for two broad reasons. First, transparency can enhance the effectiveness of monetary policy.2 By helping to anchor long-term inflation expectations, transparency improves policy efficacy and facilitates the overall pro-equilibrating tendencies of the economy. Central bank communication increases the predictability of central bank actions.

Businesses continue to have problems mobilising capital linked to the remaining risk in the business sector, the question of discipline of borrowers, and the need for prospective borrowers to adapt to the more sophisticated credit requirements of commercial banks. These factors restricted the expansion of commercial bank credits. On a positive note, the ability to maintain macroeconomic stability resulting from low inflation, has enabled monetary policy to remain accommodative and helped reduce the financial burden on businesses up to a certain level. Although in the year 2000 the economy grew less than forecasted, we have, however, managed to make considerable progress in tackling a number of important problems arising from the 1997 crisis, and some of these are bearing fruit. On financial institutions, overall financial position of the Thai banking industry has improved markedly. A number of banks are now showing profits while interest spread has improved to 1.57 by the third quarter. Commercial bank external debt has also declined substantially. More than 78 % of bank’s existing foreign liabilities have been new borrowings incurred after July 1997. This shows that Thai banks have no difficulties in raising funds abroad. All banks are expected to meet full 100 % loss provision requirement by end of the year as required by the Bank of Thailand. In the last three years some B890 billion has been raised as new bank capital, raising the BIS capital-adequacy ratio to 11.95 % for the industry.