jean - claude trichet : communication, transparency and the ecb ’ s monetary policy keynote speech by mr jean - claude trichet, president of the european central bank, at the new year ’ s reception of the international club of frankfurt economic journalists, frankfurt, 24 january 2005. * * * ladies and gentlemen, it is a great pleasure to be here at the new year ’ s reception of the international club of frankfurt economic journalists. this is certainly the right place for me to discuss the “ art of external communication ”. the members of this club are among the most experienced and knowledgeable watchers of the ecb. through your reporting you play a decisive role in our communication policy. along with other media you have the important responsibility of informing the public about the eurosystem ’ s monetary policy as well as other central banking activities and of contributing to a constructive public dialogue on our policies. much has been said about the external communication of central banks in recent years and central bankers have reflected intensively on their external communication. transparency, candid explanations given to investors, savers, market participants, households and, last but not least, to our 306 million european fellow citizens are of the essence for the ecb and its governing council. it is fair to say that communication is an integral part of monetary policy. why are accountability and transparency so important for monetary policy? over the last few decades, it has been widely recognised that the maximum degree of independence for central banks, together with a clearly defined mandate, is the best way to ensure time consistency in the implementation of monetary policy and therefore to guarantee stable prices. consequently, the maastricht treaty has granted the ecb full independence in the pursuit of its mandate. in a democracy, transparency and accountability are the quid pro quo for that independence. in other words, it is the duty of independent central banks to be transparent and to communicate. we help to make the ecb accountable by explaining our objectives and decisions to the general public, to the people of europe, its elected representatives - namely the european parliament - and to the professionals in the financial markets. but transparency is not only a duty for a central bank. it is clearly also in the bank ’ s own interest to embark on an effective communication as it contributes considerably to the efficiency of its policies. this helps to anchor the inflation expectations of the financial markets and the public. through efficient communication we can reduce inflation uncertainty and the costs associated with such uncertainty for consumers and investors. therefore

the governing council of the ecb, the need for increased vigilance with respect to upside risks to price stability at the beginning of october 2005. by the end of 2005, the regular cross - checking of the economic and monetary analyses indicated that an adjustment of the very accommodative stance of the ecb ’ s monetary policy was warranted to address these risks. therefore, the governing council decided to increase the key ecb interest rates by 25 basis points, first on 1 december 2005 and then again on 2 march 2006. interest rates are still at very low levels in both nominal and real terms. short - term real interest rates ( such as the three - month euribor deflated by current hicp inflation ) have increased to reach positive levels over the past few months, but remain close to their lowest levels in decades. our monetary policy thus remains accommodative. as i said in my last press conference, to safeguard the successes of the past, the governing council is in a position of strong vigilance to ensure that risks to price stability do not materialise, thereby making an ongoing contribution to sustainable economic growth and job creation in the euro area. the single monetary policy has proved successful in anchoring inflation expectations in the turbulent context of recent quarters. however, it is important to remember that the single currency and the single monetary policy for the euro area are very long - term projects. many benefits stemming from the single currency are of a structural nature and will become even more obvious over a longer period of time. moreover, the achievements of the single monetary policy should not be seen in isolation from the broader process of economic integration in europe. the introduction of the euro has helped to consolidate the tremendous gains derived from european economic integration over past decades. i also strongly believe that the euro is and will continue to be a key catalyst for further integration. nowhere is this more apparent than in the financial domain. european financial integration i now turn to my second theme, namely the process of european financial integration. i will address both the progress of financial integration over the past seven years since the introduction of the euro and also some challenges that lie ahead. the euro ’ s success : its performance with respect to european financial integration to start, i would like to recall why progress in european financial integration is seen to be highly positive. from the eurosystem ’ s perspective, we generally distinguish four main benefits arising from financial integration. first, financial integration is of key importance for the conduct