manoeuvre so that they can equalise differences between different economies. the escb therefore does not pursue an exchange rate target. its monetary policy is oriented exclusively to the risks to internal price stability. the exchange rate does play a certain role, however, because key import goods - such as raw materials and energy - are invoiced in dollars. the decisive factor, however, is always the overall monetary policy setting. this is something which the governing council of the ecb will analyse thoroughly at its next meeting on thursday. iii mr yam, another factor which has doubtless contributed to your successful monetary policy track record is the proximity to the market of the hong kong monetary authority, which is also responsible for supervising the financial markets and the banking sector. monetary authorities must have their finger on the pulse of the financial markets. after all, monetary policy decisions have direct implications not only for the money market but also for the foreign exchange and capital markets - both nationally and globally. today, given interlinked markets and internationally active credit institutions, instability can spread more easily. this tendency is being reinforced by the fact that some credit institutions are acquiring new, truly global dimensions - as is illustrated by the announced merger of deutsche bank and dresdner bank here in germany. hence there is a much greater onus on central banks than in the past to take on responsibility for the financial stability of the financial markets, too. they have to focus their efforts in this context on crisis prevention. central banks need to monitor the markets constantly so that they can detect crisis signals at an early stage. for this they require prudential supervisory information on system - relevant individual institutions at first hand. this is why they also have an oversight function for the payment system, for that could pose substantial systemic risks to the banking sector if major market players were to experience disruptions in their payment operations. in germany it is the bundesbank which, by virtue of its involvement in banking supervision or as the government ’ s fiscal agent, is able to inject the necessary market competence and market proximity into the monetary policy decision - making process. in all the discussion about the tasks and future structure of the bundesbank, therefore, it must be assured that the german central bank remains anchored in the financial markets. the reform of the bundesbank must lead to more streamlined structures and to a strengthening of the bundesbank within the escb. germany, as one of the major industrial nations in the world and the

law and often in practice monetary policy is often tasked with other goals. the roles of central banks have changed throughout history. a paper commissioned by the bank for international settlements ( bis ) makes a useful distinction of 3 epochs : ( i ) the victorian era ( 1840s to 1914 ) ; ( ii ) the decades of government control ( 1930s to 1960s ) ; and ( iii ) the triumph of the markets ( 1980s to 2007 ) 1. central banks were put into the spotlight in the wake of the global financial crisis of 2008 / 09, prompting greater public demand for transparency in their operations. the historical, economic and geographical contexts shape the expectations for central banks outside of the basic goal of maintaining the value of domestic currencies. while in some jurisdictions, the establishing mandate requires a square focus on inflation, elsewhere other goals are formally set out. the us federal reserve act stipulates these as maximum employment, stable prices and moderate longterm interest rates. economic development objectives are also sometimes explicitly stated, or at times a more general formulation is provided ; sometimes, potentially conflicting objectives appear side by side2. over the past few years, in an attempt to sharpen their focus some central banks ( for example brazil, colombia, and new zealand ) have become explicit “ inflation targeters ” : in this regime, they establish concrete inflation targets and commit to a certain rigid framework of announcing how they are performing3. trinidad and tobago ’ s central bank was established in 1964 and its governing legislation specifies a range of objectives including to “ maintain monetary stability, control and protect the external value of the monetary unit … [ and ] encourage expansion in the general level of production, trade and employment ”. 4. monetary action in trinidad and tobago has had to respond to the economy ’ s energy - exporting nature and associated growth / inflation cycles. apart from direct local spending by energy companies, the main channel through which the energy sector affects the trinidad and tobago economy is via government taxes. this has interesting implications for monetary policy since, even in the absence of an overall fiscal deficit, government spending in excess of what it receives from domestic taxes could add to inflationary pressures. the central bank therefore has charles goodhart, “ the changing roles of central banks ”, bis working papers 326, november 2010. for a survey on central bank legislation, see central bank governance group, “ issues in the governance of central banks ”, bis, may 2009 carare, alina and mark stone, “ inflation targeting regimes ”,