, political interference will be avoided. a growing list of countries have adopted the inflation targeting approach in recent years, including canada, new zealand, australia, the united kingdom, sweden and finland. the practical implementation of the approach has varied in a number of respects, including who sets the target ( government or central bank ) ; whether it is expressed as a range or a fixed point ; the price index employed ; the use of adjustment or “ override ” mechanisms, and so on. these differences, however, are less significant than the common principle on which targets are based. so far, targets have been rather successful, though the approach has yet to be tested under adverse conditions. ( c ) tactics just as there has been convergence in the goals and the strategy of monetary policy implementation, so too there has been in matters of tactics. twenty or thirty years ago, a variety of operating tactics were used, including control of some measure of the monetary base ; variations in reserve requirements ; discretionary discount window intervention ; open market operations, at a variety of maturities ; direct lending controls ; and moral suasion. nowadays, direct controls on lending have been abandoned in virtually all countries. reserve requirements have been reduced to very low levels, to avoid distorting patterns of intermediation, thus making control of the monetary base an imprecise instrument. use of the discount window and bond market intervention have similarly fallen out of favour. central banks now generally use very short - term reversible transactions ( “ repos ” and “ reverse repos ” ) to inject or withdraw cash from the money market. the maturity of these transactions is typically either overnight or for a few days. short - term money market operations enable central banks to maintain control over overnight interest rates. longer - term interest rates are then influenced by expectations of how central banks are likely to adjust overnight rates in the face of economic developments. this, in turn, places a premium on credibility and effective signalling of policy intentions. the use of interest rates as the principal operating instrument does not mean, it should be stressed, that the volume of money and credit is considered unimportant as a determinant of inflationary trends. rather, it reflects the view that “ noise ” in the demand for bank reserves is better accommodated by some short - term flexibility in the growth of liquidity than by fluctuations in overnight interest rates ; and by the belief that judicious management of overnight interest rates will enable the authorities to achieve the desired

william r white : some observations on the professional contributions of palle andersen speech by mr william r white, economic adviser and head of monetary and economic department of the bank for international settlements, at the opening dinner of the bis conference in honour of palle andersen, basel, 2 december 2007. * * * elsebeth andersen, other invited guests, ladies and gentlemen it is a pleasure to welcome you all here to this conference dedicated to the memory of palle andersen. the chosen topic, “ globalisation and population trends : implications for labour markets and inflation ”, would have been of enormous interest to him. sadly, this is perhaps the least of many reasons why we must regret that palle is not here among us tonight. i will make reference in a moment to the wide range of topics that palle was interested in, but supply side issues, and in particular the inflation process, were at the very core of his work over many years. and, of course, the topic is given heightened significance by the fact that we are fast approaching the 50th anniversary of the seminal paper published in that area by bill phillips. it is a further pleasure to thank all of you who have come to this conference, particularly those who have prepared papers or are discussants. but in addition, let me also thank those of the bis staff who have put together this “ labour of love ”, and i do not think that is too strong a term. in particular, let me mention dubravko mihaljek, philip turner and mar gudmundsson, each of whom worked closely with palle ( though in different ways ) over many years. and finally, of course, thanks to marcela valdez - komatsudani, who was in charge of all the logistics. i am pleased to have been asked to say a few words about palle tonight. to the participants in this conference who were his friends, and i see there are many here tonight, some of my positive observations about him might seem self - evident. i hope that they are worth repeating nonetheless. and for those of you who did not know palle, or knew him only by academic reputation, let me introduce you to a complex and endearing character who contributed a lot to macroeconomics, to the formulation of better economic policies, to the more harmonious functioning of the monetary and economic department of the bis, and to me personally. he was a big man, in every way but size. let me