is most effective when the policy objective is clearly understood and accepted. when consumers and savers, business owners, and financial market players, all understand the bank of canada's policy objective – and believe that it is attainable – then they can make better long - term plans and decisions. and when everyone expects this target to be maintained, and acts accordingly, then the target becomes self - reinforcing. but the benefits of transparency don't stop there. i believe that transparency also helps us to make better decisions. the extra rigour that comes from holding the rationale behind our decisions up to external scrutiny leads to better results. finally, the bank of canada is a public institution – funded by, and accountable to, the taxpayer. information and analysis gathered in the context of the bank's business should be considered a public good – except when the release of such information would compromise the implementation of the bank's mandate. are there limits to transparency? in general, more transparency is better than less. but this does not mean that there are no limits. first, there is the need to protect the confidentiality of some information and analysis that is given to the bank by outside parties, be they public - or private - sector institutions. indeed, public release of third - party, confidential information would jeopardize the central bank's ability to get all the information it needs to make good monetary policy decisions. second, there is the need to protect the integrity of some internal policy deliberations. for example, the public release of policy advice and recommendations could stifle the free debate and consensus building that is necessary for sound policy - making. we want to hear all aspects of an argument, but it could be hard for staff members to play devil's advocate, knowing that such a position will be made public and could be taken out of context. and certain information should not be released while policy is still being developed, or has not yet had its full effect. in such cases, premature transparency could lead to misinterpretation or be acted on inappropriately, which could derail good policy intentions and could potentially be damaging to canada's economic interests. third, there is the need for good quality information. providing useful, relevant information is far more important than dumping a large quantity of information of questionable quality. too much information can actually cloud what is important. as a result, actions and decisions can become less transparent, because the really important, effective, and

relevant information gets lost in the minutiae. good quality information must not only be accurate, it must also be communicated clearly and simply, so that it won't be misunderstood. this is especially germane when we try to be transparent about our assessment of the outlook by publishing our economic projections, along with the risks and uncertainties surrounding them, and forward - looking statements about possible future policy actions. transparency in setting monetary policy debates about the limits to transparency for effective monetary policy are certainly not unique to the bank of canada. central banks around the world are still learning the best ways to communicate monetary policy. this is an important element of the art, rather than the hard science, of central banking. i believe that we at the bank of canada have made great strides in this area. so let's now take a closer look at the issue of transparency in setting monetary policy from the three perspectives that i mentioned at the outset : transparency about our policy framework ; transparency about the inputs, the processes, and the reasoning behind monetary policy ; and transparency about our assessment of the outlook. the bank made a major leap forward in increasing transparency about our policy framework when we adopted an explicit inflation target in 1991. this target provides a clear objective for monetary policy, which has helped to anchor financial and economic decisions. it makes it easy to measure the success of monetary policy and to hold the bank accountable for its actions. canadian individuals and firms can align their savings, investment, and spending plans with a common inflation - control objective. if inflation persistently deviates from the target, we are committed to explaining the reasons why, what we will do to return it to target, and how long we expect the process to take. previously, when we targeted monetary aggregates, for example, there was ambiguity about what the bank was trying to achieve, and we were not always clear about the implications of such a target for output, inflation, and interest rates. now, as well as being clear about our objective, we are also being transparent about our assessment of the factors that influence inflation and about how we implement monetary policy. we conduct monetary policy in a symmetric way, worrying as much about the trend of inflation falling below target as we do about it rising above target. to keep inflation on target, we try to keep the economy operating near its full capacity. when the demand for goods and services pushes the canadian economy against the limits of its capacity, and inflation is poised to rise above target, the bank will raise