evolution of monetary policy. a fourth dimension of transparency has to do with the extent of information on the central bank ’ s rationale for its policy moves. such information helps market participants formulate their own outlook for the economy and monetary policy and therefore their projections of future interest rates and financial asset prices. and it also helps the public put monetary policy action in context so that accountability of the central bank is as informed as possible. and a final aspect has to do with the regularity and predictability of the timing of policy decisions and communications. when a central bank is reasonably predictable in its policy timing, its decisions are likely to raise fewer questions and are therefore relatively easy for the public to comprehend. when policy achieves a high level of transparency in this sense, unexpected or rapidly evolving economic developments and not policy changes are the news. this, of course, is not to say that a central bank will never surprise the market. as i mentioned earlier, the most important task of a central bank is to get monetary policy right. at times, getting policy right will involve taking action unexpected by the market - for example, in its timing or magnitude. this situation is most likely to arise when economic or financial conditions are changing particularly rapidly. this might be associated with financial or economic crisis - as in the fall of 1987 or 1998 - but it need not be. these cases are relatively infrequent, but they do occur. the presumption against taking a surprise move, in timing or magnitude, should be strong, but it is a rebuttable presumption. the challenge is to weigh the good that comes from taking a move that a rapidly evolving situation appears to call for against the cost of a diminished sense of regularity in the policy process, which should be the norm in supporting transparency. us practices on transparency in february 1994, the fomc adopted the practice of immediately announcing changes in its policy stance and, in effect, began to disclose immediately the expected federal funds rate. in subsequent fomc meetings, when no policy action had been taken, no formal announcement followed. however, in the absence of a policy action the media were informed that the meeting had ended and that there would be no further announcement. in this way, from that point on, the fomc immediately disclosed changes in its policy and its decisions not to take policy action at its scheduled meeting. though these steps clarified the current stance of monetary policy, the committee recognized that it could further enhance the transparency

roger ferguson, jr : transparency in central banking : rationale and recent developments remarks by mr roger w ferguson, jr, vice - chairman of the board of governors of the us federal reserve system, before the national economists club and society of government economists, washington, dc, 19 april 2001. * * * it is a pleasure to have this opportunity to address this joint meeting of the national economists club and the society of government economists. i would like to discuss a topic that is of particular interest to me - the transparency of central banks. as you know, transparency relates broadly to the openness of a central bank in stating its monetary policy decisions and explaining the reasoning behind them. i would like to make two main points : first, there is a strong rationale for a high degree of transparency in central banking ; second, the world's major central banks have become quite transparent in recent years. of course, the views expressed are my own and should not be interpreted as the position of the federal open market committee or of the board of governors. the past and recent trends in transparency in the past, central banks around the world tended to operate with considerable secrecy. the need for and appropriateness of such secrecy was virtually unquestioned - it was part of the culture of central banking. indeed, the one word of advice for a new central banker was probably " mystique. " that single word encapsulated much of the tradition and wisdom of how central banks related to the public just a few years ago. as you are aware, the federal reserve and other central banks have moved considerably away from mystique and toward transparency in recent years. for example, the new european central bank has incorporated a number of transparency aspects in its policy process and has emphasized the importance of communications. to highlight this importance, otmar issing, the bank's chief economist and a member of its executive board, characterized communications as the " hidden pillar " of the ecb's monetary policy strategy. the bank of japan, likewise, has taken steps toward greater transparency, particularly following the revision of its governing law in 1998. in the united kingdom, the bank of england act of 1998, which established the operational independence of the bank, also strengthened transparency measures that the bank had implemented earlier in the 1990s. like the federal reserve, these central banks announce policy changes after meetings of their monetary policy committees and hold press conferences or publish minutes to explain policy deliberations. they also regularly offer detailed accounts of