In the case of Chile, this duty to impart information is stipulated in the Central Bank’s Constitutional Organic Law which mandates that once a year the Bank must inform the President of the Republic and the Senate about its deliberations and developments. This takes place in September when the Central Bank Board presents its Monetary Policy Report to the Senate. Nevertheless, the Central Bank of Chile goes beyond this requirement and reports not only to the Senate in September but also presents a monetary policy report to the Senate’s Finance Committee in January and again in May. The same happens with the Financial Stability Report which is published in January and June each year. Similarly, the Bank gives an account of its management of international reserves once a year as part of its Annual Report. However, this is not enough. The legitimacy of the Central Bank is upheld by direct, open, and non-excluding communication with the general public and so these documents are uploaded on the Bank’s website at the same time as they are being presented. Moreover, the Bank issues other reports, communications, minutes, specialized studies and statistics, all of which are available to the public. There are also press conferences and interviews with Bank board members and staff. The time when the workings of central banks were something complex and mysterious has also passed. We want the community to understand our work since it consists of providing a public good – stability – which enables the country to progress.

Thus, we can claim that greater transparency has led to better economic performance. As we see in Chile, there is a lot of talk about the decisions and the scenarios of the Central Bank and this is good because it strengthens credibility and keeps authorities committed to their objectives, not only at the moment of communicating but also at the moment of adopting those decisions. Effectiveness of monetary policy is reinforced by communication with market participants and by some degree of predictability in the Central Bank’s conduct of its policies. Monetary policy affects inflation through its effects on spending (consumption and investment) and on asset prices. The Central Bank controls short-term interest rates but these have only limited effects on the economy; financial market participants base their decisions on the whole term structure. Investment, for example, is fundamentally guided by long-term rates. Nevertheless, expectations about the course of short-term rates naturally are key determinants of the long-term rate and therefore do influence the whole term structure. Thus, expectations about the evolution of monetary policy contribute to its effectiveness. A transparent central bank affects the market’s expectations by providing  2  BIS Review 92/2008  market participants with information on which they base their vision of the likely course of inflation and monetary policy actions. The Central Bank of Chile’s communication of monetary policy In the Chilean case, our main vehicles through which we give account for our objectives of price and financial stability are the quarterly Monetary Policy Report and the bi-annual Financial Stability Report.