deviations from 2 % are equally undesirable. 4 how economic agents assess future price developments influences their behaviour – for example, purchasing decisions among households, wage negotiations between wage bargainers, or pricing policies of enterprises. if private agents expect inflation to stand at 2 % over the medium term, and if this expectation is reflected in their economic decisions, it will be that much easier for the central bank to achieve its objective. its monetary policy is thus more efficient. this means that the desired effect can be achieved with less use of instruments. if, by contrast, workers and trade unions expect persistently high inflation rates, they could continue to make well above - average wage demands, for example. or enterprises could continue to raise their prices in anticipation of further increases in costs. if targets are clearly missed over a longer period of time, the risk of economic agents adjusting their expectations will grow. against the backdrop of the current persistently high inflation rates, there is a danger that inflation expectations will become detached from their anchor. according to the ecb consumer expectations survey, the expectations of consumers in the euro area for inflation 12 months ahead and three years ahead declined significantly in april, after they had increased markedly again in march. according to the 3 / 9 bis - central bankers'speeches bundesbank's survey, the downward trend in the inflation expectations of individuals in germany for the next 12 months recently continued. however, inflation expectations here, too, remain at an elevated level. the financial markets exhibit a high level of inflation uncertainty beyond the medium term. in this context, financial market participants are hedging against inflation rates above the target, which is reflected in the historically high inflation risk premia. longterm inflation expectations for the euro area, which are derived from expert surveys by consensus economics, are closer to the inflation target of 2 %, but still slightly higher. in order to continue to provide a secure, credible anchor, monetary policy must make a convincing stand in the fight against inflation. at present, this is primarily a question of convincing through our actions – that is, raising key interest rates. only if our actions are persuasive can our words as central bankers have an impact, both in terms of inflation expectations and expectations about future monetary policy. 2. 3 guidance for expectations concerning the monetary policy stance for some time now, communication has been seen as an independent monetary policy instrument. here, i mean forward guidance. it was introduced in the euro area ten years ago

anselmo l s teng : corporate governance in the financial sector welcome speech by mr anselmo l s teng, chairman of the monetary authority of macao, at the fsi - seanza regional seminar on corporate governance for banks, macao, 22 april 2008. * * * distinguished guests, dear delegates, ladies and gentlemen, good morning, i would like to extend my warmest welcome to all of you, on behalf of the monetary authority of macao, for attending the fsi - seanza regional seminar in the next three days. it is our honour that fsi and seanza hold this prestigious seminar in macao, a fascinating city of a unique mix of eastern and western heritage and recreation, featured by various historical and nostalgic constructions as well as gigantic entertainment complexes. i am very pleased to have the privilege to make an opening remark in this occasion and to share with you some of my views on corporate governance in the financial sector. undoubtedly, this is a prominent topic drawing extensive discussion amongst regulators and entrepreneurs in developed and developing countries at all times. to put the discussion in a nutshell, i would like to start with a study of the idea enshrined in the term “ corporate governance ” which is a legacy of our ancient wisdom. the word “ corporate ” comes from latin, meaning the formation of a body, and the word “ governance ” originates from greek, implying to steer a vessel across the sea. these concepts of ancient wisdom is still relevant nowadays, since the protection of shareholders ’ or stakeholders ’ interests as well as the board ’ s role to lead an institution to sail through uncertainties and challenges is the essence of modern corporate governance. in the context of the financial sector, effective corporate governance practices are indispensable to maintaining trust and security and critical to the proper functioning of economic and social system as a whole. poor corporate governance may lead to loss of public confidence in the ability of a financial institution to manage its assets and liabilities in a prudent manner, trigger more serious impacts on the financial sector through contagion effects and may even end in systemic crises. different from other sectors, financial institutions, particularly credit institutions, have “ duties of care ” not only to their shareholders but also their stakeholders, namely, depositors and customers. as the sole regulator of the financial sector of the macao special administrative region, the monetary authority of macao has exerted a lot of efforts to strengthen corporate governance in order to