##t treaty is perfectly clear on this point. it would be undesirable if any inflationary differences within the union were to lead to politicisation of the interest rate policy within the ecb governing council. it seems to me that this risk is greater in the case of direct inflation targeting than if monetary targeting were pursued. i am approaching the end of my address. i have told you which considerations underlie the choice of a monetary policy for the ecb and i have outlined the differences between monetary targeting and direct inflation targeting. the success of either strategy is dependent on largely identical factors. here a key role is played by vital concepts such as credibility and transparency. it would be recommendable to inform the public regularly and in general terms of the considerations underlying interest rate measures. furthermore, the ecb will in any case, in the daily implementation of its monetary policy, have to take into account the various indicators which contain information about future price movements. all in all the differences between the two strategies should not be exaggerated. nevertheless, i profess that the considerations which i have set out lead me so far to have a certain preference for monetary targeting. the success of the bundesbank shows that this strategy underpins the competence of the central bank, thus offering an optimum safeguard for its independence. should you have a different view, then i hope that my address has contributed to a dynamic start - up of the discussion ahead.

dr. duisenberg discusses strategies for monetary policy in emu address by dr. w. f. duisenberg, president of the netherlands bank and of the bank for international settlements, on the occasion of the board meeting of the banking federation of the european union held in maastricht on 20 - 21 / 3 / 97. it is with great pleasure that i am addressing you on the european economic and monetary union here in maastricht today, the very location where that union was pieced together. it was here that we made a concerted effort some five years ago to lay the foundations for the economic and monetary stability of europe in the 21st century. since then we have been busily building on these foundations with the result that we now have the outlines of the european central bank. the framework for monetary policy contains three main elements : its primary objective, strategy and instruments. where the first is concerned, there can be no misunderstanding : the maastricht treaty prescribes that the overriding objective of ecb policy shall be price stability. knowing you all to be distinguished financial and monetary experts, i need hardly point out to you that to attain this objective, strategy must be transparent and credible. it is not for nothing that in recent months this issue has been figuring prominently on the agenda of the european monetary institute, the precursor of the ecb. let me give you a brief impression of the consultations held there. as soon as it has been decided in early 1998 which countries are to take part in emu, the ecb will decide what monetary strategy to pursue. generally speaking, there are two aspects to such a strategy : internal decision - making within the central bank and, equally important, the presentation of its measures to the outside world. in fact both aspects hinge on the question which variables should underlie the central banks interest rate policy and what weight should be assigned to each of these variables. after all, monetary policy is complicated by the fact that inflation reacts to the central bank ’ s interest rate decisions with long and varied lags. actual inflation rates are therefore not cut out to be a gauge of monetary conditions. the central bank should focus on information which provides insight into future inflation, and possibly formulate a number of intermediate objectives, the so - termed intermediate target variables : in europe today the money supply and the exchange rate often figure as such. the exchange rate in particular plays a major role in open economies, where inflation is due largely to external