This is because uncertainty is reduced as market expectations are formed using a more superior set of information. And third, being more transparent also helps raise the quality of central banks’ own works which directly contributes to enhancing their credibility. However, despite the positive benefits, there are occasions when there would be arguments for central banks to go less than full transparency, especially with regards to their market operations. This is because transparency is not only about providing information as the academia normally assume. But transparency is also about how a central bank is being seen or being known in its operations in financial markets. Hence, for its operations to be effective, sometimes less-than-full transparency can be more efficient, for example, in the foreign exchange markets. Therefore, from practical considerations, the rationale for limiting central bank transparency includes: First, legal requirements and the risk of impinging on personal privacy, as well as for reasons of market or commercial sensitivity and public interest; Second, the risk of compromising the decision-making process; for example, saying too much or giving out too much information about what went on in the policy meetings; Third, too much information can also be tricky because of the risk of misinterpretation. This is because one cannot assume that all markets are efficient in processing the same information; Fourth, in central bank operations, elements of surprise can be useful on occasion; And fifth, central banks being what we are should reserve the right to act.

Parallel to this, central bank independence takes the first place in monetary policy debates especially in developing countries where lack of sustained fiscal discipline and higher inflation rates have been common. Both country experiences and economic literature have proven that there is a direct relationship between central bank independence and inflation. That is, the more independent and thus the more insulated from political pressures a central bank is, the better the country performs in terms of reducing the inflation level. The first thing that the independence of a central bank then evokes is de jure independence. Within this context, factors such as goal independence, instrument independence, rules for the appointment, term of office and discharge of high level officers, central banks’ control of their own budgets and provisions on their staff are among the important issues that can be addressed in central banks’ law. In fact, what I find particularly critical based on my experience is that independence is not a concept that can be simply achieved by legal independence. I believe achieving central bank independence is a process you live through on a daily basis and is closely related to central bankers’ stand on economic policies and stability. The new Law on the Central Bank, enacted in May 2001 in line with EU norms and central banking practices in the world, has been the most important step strengthening our Central Bank’s operational independence. By this Law, as I mentioned before, the main objective of the Bank is stated as to achieve and maintain price stability.