Other questions follow. Will the mechanisms of monetary policy transmission still work efficiently? Can monetary policy moves made as they are in Germany today, using monetary aggregates as intermediate targets, succeed in the euro area as well? Which monetary aggregates will be used? What of the money demand function? Will there be a real and reliable database obtained by collecting and harmonising data from within the euro area? Targeting inflation and conducting monetary policy in light of the target has been the normal procedure for many countries. Nonetheless BIS Review 1/1999  –3–  there are lingering suspicions in some quarters about the credibility and reliability of this system, and since there is a good chance that a loss of credibility will follow a failure to meet an inflation target, the ECB will not announce such a target. I should also mention that some member countries’ central banks have reservations about conducting monetary policy with inflation targeting. People who accept monetary aggregates as good intermediate targets say that in accordance with the principles of continuity and flexibility, which are the basis for central bank credibility, it is more realistic to target monetary indicators and use these targets to attain price stability. For myself, I believe that central banks can control these monetary indicators and are responsible for them. If a central bank is assigned a task, it must have control over its instruments and operations and enjoy independence in the conduct of monetary policy to perform efficiently.

As I mentioned before, the ECB’s independence in implementing monetary policy towards the price stability objective can be ensured in this way. The second important characteristic of the ECB is its credibility. High credibility will increase the confidence of the public in the ECB’s policies and objectives, which in turn will help it achieve its primary objective. The most important ingredients of credibility are transparency and success in attaining its monetary policy objectives. For years now the central banks of Germany, France and the UK have been earning credibility, and the confidence of firms, institutions and individuals in these banks has increased considerably. The ECB, established in an environment of confidence provided by the credibility of national central banks, believes its growing credibility will translate into confidence in its conduct of monetary policy. The third important characteristic of the ECB is transparency, already mentioned as one of the keys to greater credibility. Transparency means openness about the ECB’s objectives, its policy implementation, its monetary policy deliberations and the forward-looking orientation of its policies. The ECB has explained, clearly and explicitly, that its main goal is maintaining price stability and described the strategies by which it is seeking to achieve it. I have already pointed out the additional issues of growth and unemployment. There is still discussion, but there is consensus concerning the primary objective. Discussion of these topics will continue in publications, announcements, speeches by ECB authorities and discussions. This kind of transparency is an important characteristic of the ECB.