hermann remsperger : the monetary stability foundation speech by professor dr hermann remsperger, member of the executive board of the deutsche bundesbank and chairman of the council of the monetary stability foundation, at the third conference of the monetary stability foundation, “ challenges to the financial system – ageing and low growth ”, frankfurt, 7 july 2006. * * * ladies and gentlemen i would like to warmly welcome you to the third conference of the monetary stability foundation. as previously we have organised this conference in cooperation with the federal ministry of finance and the deutsche bundesbank. in his introduction, the bundesbank ’ s president, professor axel weber, will go into the specific subjects of our conference. in my capacity as the chairman of the council, i just want to make a few remarks about the monetary stability foundation itself. the monetary stability foundation was set up as a federal institution under public law by act of parliament at the beginning of 2002. its endowment capital amounted to dm 100 million or €51 million. the capital was raised from the profits which the bundesbank made from the sale of dm 1 gold coins in july 2001. the coins were designed to commemorate the special role and history of the deutsche mark. the gold required to mint the coins was taken from the bundesbank ’ s reserves. as the book value of the gold used was lower than the market value at which the gold coins were sold, a profit of €94 million was made. €43 million were used to finance the restoration of the museum island in berlin. the remaining €51 million were given to the foundation. it is the foundation ’ s task to promote public awareness of the importance of monetary stability. for this purpose, it supports economic and legal research in the field of money and finance. this includes all aspects of monetary policy and financial stability. in this sense it also covers the issues of globalisation and the interaction of monetary and fiscal policy. the foundation has now more or less completed its start - up and development stages. this process initially involved designing its strategy and fixing the policy instruments. during this period, the foundation inevitably had only a minor public presence. the most important decisions have now been made and implemented, which means that the foundation is fully operational. the foundation will use about €1 million out of its income to finance the new institute for monetary and financial stability which is linked to frankfurt university. at this research institute, three departments will work together in the area of monetary stability

do, however, often direct our messages at ﬁnancial markets. a large body of research has found that ﬁnancial market agents have a good understanding of our monetary policy. [ 4 ] our forward guidance is a good example of this. for a number of years now, the ecb governing council, amongst other things, has been hinting at how long it will arguably keep policy rates at their very low level, contingent on the data available at the given time. this tool enables us to offer the markets guidance on their interest rate expectations and inﬂuence long - term interest rates. in this way, monetary policy can provide additional support for the euro area economy even though our policy rates are already very low. this forward guidance has been a success, as shown by a bundesbank research paper, amongst others. less has been done so far to research our communication with the general public. the available research indicates that monetary policy through this channel has barely affected the expectations of households and ﬁrms so far. [ 7 ] it is precisely these inﬂation expectations that matter when it comes to price movements on the goods markets : when households are making decisions about their purchases, when companies are setting the prices of their products or employers and trade unions are negotiating wages. a stronger focus on communication with the public will therefore probably enhance the effectiveness of monetary policy – by, amongst other things, engendering a higher level of credibility [ 8 ] and greater trust. a few weeks ago, benoit ( tonne ) cœure recalled this link in his ﬁnal speech as a member of the ecb executive board when he said : “ if monetary policy remains a conversation between central banks and ﬁnancial markets, we shouldn ’ t ( tonne ) be surprised if people don ’ t ( tonne ) trust us. ” beyond this, i see a second and compelling reason for better communication with people : monetary policy must be accountable to the public. for, in our democracy, central bank independence is rather like a foreign body. periods of high inﬂation have shown that politically independent central banks are https : / / www. bundesbank. de / en / press / speeches / change - and - continuity - 824754 3 / 11 2 / 4 / 2020 change and continuity | deutsche bundesbank better equipped to safeguard the value of money. this is why central banks were deliberately granted independence as an exception. and that is also why we have the obligation to give an