the past. in the case of thailand, inflation targeting is the best tool to ensure high output, sustainable growth, export competitiveness, prevention of a worsening of income distribution and a transparent and accountable central bank. the bank of thailand last year announced our explicit intention to control inflation, and the range of 0 to 3. 5 % of core inflation was announced in 23 may 2000. since the beginning of the year, we have seen the yield on 10 - year bonds drop from 7. 91 % per annum to 6. 1 %. while other factors may have helped toward this reduction of long term borrowing costs, i am sure that public confidence in our commitment to control inflation was certainly one of the important factors. … the first seminar we organized concentrated on the principles of inflation targeting and laid the overall groundwork. in this seminar, we will go deeper into its implementation, its relevance to emerging economies, and the problems that it may face in the environment of large public debt overhang. we are very fortunate indeed to have with us eminent speakers, most of them from countries that have successfully applied this technique. i therefore strongly urge the audience to take advantage of the presence of the experts by asking questions and airing your concerns to the fullest extent possible. i very much hope that by the end of the seminar, you will all become convinced.

inflation, if it exists, does have an adverse effect on real individuals ’ income, especially those in the lower brackets who are less able to renegotiate their pay. therefore, while the central bank does not have direct power to enforce a fair distribution of income, if the central bank fails to do its job properly and this results in high inflation, it can make the situation worse. next, the general public also wants the country ’ s exports to be competitive. here we are talking about the export of goods and services, inbound tourism included. again, the competitive edge of business depends on many factors outside the scope of central banking : marketing know - how, research and development, and technology included. and when one looks at competitive advantage of firms at the international level, things like quotas, trade protection and trade negotiations do add complications to the equation. but there is one factor that cuts across all considerations and that is inflation. if the inflation rate in a country far exceeds those in its trading partners, it will erode that country ’ s competitiveness over time. therefore, the central bank can affect the country ’ s export competitiveness, and the public can rightly expect the bank to guard against this. finally, the people invariably want transparency. they want to know how the central bank views the situation, how it acts and how it can be held accountable for its action. they will also want to see whether the central bank is capable of looking ahead into the future. … how can the central bank in an emerging economy like thailand best deliver to the people all that they expect? my answer is inflation targeting. the best environment that the central bank can provide for the economy to attain a high level of output and steady growth is one with price stability. under inflation targeting, the monetary policy board has to look ahead 18 - 24 months and adjust its stance today to influence the outcome of the future. this will help minimize the boom and bust phenomenon. the floating exchange rate regime will also help prevent imbalances from building up excessively, hence minimizing the risk of major crises. in terms of transparency and accountability, inflation targeting is probably the best tool of communication. while the general public may have difficulty understanding and keeping track of monetary growth targets, it fully understands inflation, the index of which is calculated and announced by an independent agency, in the case of thailand the ministry of commerce. the regular publication of inflation reports will also help inform and educate the public much better than in