the situations, to communicate the rationale for the use of unconventional measures, its approach to making the results of the stress - testing exercise public, as well as its ability to manage market expectations while maintaining policy credibility. all these have been instrumental to the success so far of the fed ’ s policy response. it is, therefore, clear from the crisis that wellexecuted and credible communication can help anchor market expectations. let me now turn to my second remark on strengthening the monetary policy framework. i agree much with what has been said about the need to improve bank regulation and supervision going forward, especially to reduce procyclicality in the financial system. but for monetary policy, the framework can also be strengthened to increase its effectiveness in safeguarding price and financial stability. the first is that good macro - surveillance process is a must to help identify key risk that might be developing in the economy. this surveillance needs to cover both developments in the real economy and in the financial markets so that any potential risk to financial stability can be identified early. second is the need for a disciplined decision - making process that takes into account information from the surveillance process in the deliberation of monetary policy. one key common weakness in the past has been the limited use of information on the financial side in the formulation of monetary policy. third, in order to deal effectively with both price and financial stability, the thinking now is to focus monetary policy on its core function of maintaining price stability, while financial stability objective is best served by ensuring a robust and efficient financial system through strong bank regulation and effective supervision. nonetheless, to the extent that developments in the financial sector may have systemic implications, monetary policy can be combined with macroprudential measures aimed at reducing risk to financial stability at the source. an example of this is excessive credit growth in a certain sector that can be discouraged by tightening up the relevant lending standards. a number of seacen economies have adopted this approach, especially for housing loans. however, there is a concern that this approach is judgemental and lacks a coherent framework ; i. e., how can we control both the price of credit through monetary policy and the quantity of credit through macroprudential measures. another unsettling issue is whether monetary policy should lean against the wind of asset price boom and credit expansion at a cost of somewhat weaker growth and lower inflation. on this, i think our default position should be that we should because the cost of getting it wrong by not doing enough can be

bandid nijathaworn : the future of monetary policy remarks by mr bandid nijathaworn, deputy governor of the bank of thailand, at “ south east asia central banks / bank for international settlements ( seacen / bis ) seminar on central bank challenges in emerging market economies in the post - crisis era ”, kota kinabalu, malaysia, 21 january 2010. * * * first, let me thank seacen and the bis for asking me to lead off the discussion on this important topic. for the seacen economies, i think two important questions stand out. the first is what went wrong with monetary policy and what can we learn from it? and the second is what more can we do to improve our understanding of monetary policy so that long - term price stability can be assured while the risk of financial instability is avoided? although the current global financial crisis has been a dramatic experience for central banks, it also offers an opportunity to reassess both the intellectual underpinning and the practical implementation of monetary policy. as we all know, monetary policy in the last fifteen years did cover almost the whole of a global business cycle, starting from the period of the socalled “ great moderation ” when there was a perceived end to economic volatility with interest rates remaining low for an extended period, to the current global financial crisis that saw aggressive use of monetary policy by the major central banks to combat economic contractions with near - zero interest rates and the use of unconventional measures. this reassessment, therefore, is important and will provide a useful starting point for a better deliberation of monetary policy going forward. for this morning, i want to focus my remarks on three issues : first the lessons we can learn from the crisis ; second how to move forward to strengthen monetary policy framework in light of the crisis to ensure long - term price and financial stability ; and third the relevance of inflation - targeting as a monetary policy framework in the post - crisis era. from the crisis, there are a number of important lessons that can be drawn. the first is that monetary policy remains the right instrument to maintain a low inflation environment which is crucial for sustainable growth. but the most important lesson from the crisis is that low and stable inflation alone is not sufficient for ensuring financial stability. this is because the risk to financial stability can come from many sources other than domestic inflation. in the current crisis, it was the housing bubble and excessive risk - taking by the financial institutions that