. ludek niedermayer, deputy governor of the czech national bank, will first explain to you “ why and how ” inflation targeting was adopted in the czech republic – the first country to embrace this regime in our region. then, it will be for ms csermely agnes, director with the national bank of hungary, to share with us the “ lessons and challenges ” put forth by the hungarian experience with inflation targeting. our last speech for this event will be held by mr. cristian popa, deputy governor of the national bank of romania, showing you just where we, as central bank and as economy, stand in the preparation of the introduction of inflation targeting. what i do want to mention is the current debate on the appropriateness of adopting inflation targeting in romania. i am very happy that monetary policy steals the spotlight from football, at least temporarily. some acknowledged romanian economists claim that inflation targeting is not needed since future euro adoption requires fulfilling the grueling conditions of the erm - ii framework. in line with this argument, the exchange rate might prove to be a better choice for a nominal anchor. given the soon to be completed capital account liberalization, i believe that exchange rate management would be very difficult outside a currency board. although i am confident about our option, i respect all disagreeing opinions. for those retaining their doubts about the benefits of inflation targeting, there is one more argument, courtesy not of a renowned economist, but of the danish physicist niels bohr. when asked why he, an enlightened scientist, kept a horse - shoe on display in his house, his prompt answer was that “ it helps non - believers too ”. likewise, provided that the national bank of romania has convinced enough people of its commitments, non - believers should also enjoy the benefits of this policy change. ladies and gentlemen, let me now introduce rachel lomax, deputy governor of bank of england and member of the monetary policy committee. before passing on the floor, i would just like to mention that mrs. lomax has previously visited romania. ten years ago mrs. lomax was negotiating development programs in romania on behalf of the world bank with a team including myself and some other people in this audience. she is now here again to assist us in preparing to achieve another goal related to romania ’ s development, that of lasting price stability.

mugur isarescu : inflation targeting - international experience and romania ’ s prospects speech by mr mugur isarescu, governor of the national bank of romania, at the conference on inflation targeting, bucharest, 30 march 2005. * * * ladies and gentlemen, i would like to begin by extending a very warm welcome to you to the national bank of romania. it is a great honor for me to open the conference “ inflation targeting : international experience and romania ’ s prospects ”. i would like to add that i am particularly pleased that such distinguished guests agreed to join us today and share some of their insights regarding inflation targeting. this spring marks an important moment in our history : in april 1880, the national bank of romania was established, and became the 19th central bank in the world ; now, 125 years later, our central bank is getting ready to become the 19th ( plus 3 ) inflation targeter. for a few years now, the national bank of romania considered inflation targeting to be the monetary policy framework suitable for the timeframe between achieving single digit inflation and joining the erm ii. my confidence in inflation targeting stems from my belief that price stability should be the primary goal of monetary policy and that there is full long run compatibility between this objective and economic growth. this has been proved by successful inflation targeting experiences of numerous countries, regardless of the level of economic development. although i see why it is difficult to define inflation targeting, i consider the definition given by ben bernanke as being the appropriate one. accordingly, inflation targeting is “ a framework for monetary policy characterised by the public announcement of official quantitative targets [ … ] for the inflation rate over one or more time horizons, and by explicit acknowledgement that low, stable inflation is monetary policy ’ s primary long - run goal. among other important features of inflation targeting are vigorous efforts to communicate with the public about the plans and objectives of the monetary authorities, and, in many cases, mechanisms that strengthen the central bank ’ s accountability for attaining these objectives. ” the definition can be wrapped up by adding instrument independence for the central bank and the lack of an explicit intermediate target, as all factors affecting inflation are taken into consideration. an important feature of inflation targeting is the need for accountability of the central bank. within the inflation targeting framework, this is enhanced by the public announcement and commitment to attain an inflation target. the explicit target and the public and transparent nature of inflation targeting also enable the central bank to withstand political pressures more easily and to overcome