##bly pegged and publish its available reserves on a regular basis. the simplicity of the goal facilitates communication and provides a single focus for policy. however, in a regime with multiple objectives, central bank officials must try to be transparent with respect to more than one objective. in short, as others have noted, more - complicated mandates require more - intricate communication. in that case, clearly summarizing a balancing of the goals would be more difficult in a short announcement, requiring as well other vehicles for describing the basis for policy moves, such as the fomc minutes and the semi - annual report on monetary policy. recent specific suggestions about central bank transparency i would now like to turn to some recent specific recommendations for improved transparency, in some cases with respect to the federal reserve system. these include the quantification of the central bank ’ s objectives, the publication of forecasts, and the earlier release of minutes. first, a central bank, the argument goes, should adopt and explicitly reveal numerical goals for its objectives in order to facilitate holding the monetary authority accountable, to reduce uncertainty, and to anchor private expectations about such things as inflation trends and monetary policy decisions. for example, many countries in recent years have set a single quantitative inflation goal. but, in my view, this approach has potential drawbacks. as i have noted on previous occasions, even in the case of a single inflation goal, the selection of a particular price index to guide policy is difficult, and the appropriate index and inflation value might change over time as the structure of the economy evolves and the pace and nature of technological advances vary. inflation targets also present problems in the presence of supply shocks, such as large increases in oil prices, that may simultaneously increase the price level and decrease aggregate output. most inflation - targeting central banks attempt to gain flexibility in such cases by focusing on core inflation, by having relatively wide target ranges, by stipulating “ escape clauses ” that allow inflation to diverge from the target for a while, or by aiming at inflation well in the future or at an average rate over the business cycle and thus allowing enough time for the effect of such shocks to have died down. despite such elements of flexibility, an inflation - targeting regime may still not typically attend sufficiently to output variation or financial stability. furthermore, these elements of flexibility may not foster the credibility of the central bank any better than a system of multiple objectives. the longer the policy timeframe and the wider the band for an inflation - targeting regime

, it has become increasingly obvious over the years that a central bank needs a substantial insulation from political pressures to execute policy appropriately. such an independent central bank is less likely to succumb to the short - run temptation to boost output or to finance national budgets at the expense of long - run objectives such as price stability. in part, this follows because independent central bankers can have a more - distant horizon than other policymakers, which is desirable given the lagged effects of monetary policy on output and prices. to be sure, the establishment of the goals of monetary policy should take place within the democratic process, but experience teaches us that outcomes are better when the central bank has discretion to achieve those ends. thus, the elected representatives of the public should determine the goals of monetary policy, while a central bank should be granted independence to set its instruments. central bank openness allows the public and its elected representatives to make informed judgments and constructive criticisms about policies made by its central bank and to assess economic outcomes relative to specified long - run objectives. in general, to hold policymakers accountable, the electorate needs to know what they have done and the reasoning behind their key decisions. such democratic accountability is even more important for central bankers, because the voting populace does not directly elect them. in short, transparency is a quid pro quo for independence. clarity about policy decisions also can enhance monetary policy ’ s economic effectiveness. like other central banks, the federal reserve controls only a very short - term interest rate on borrowing reserve funds between depositories, the overnight federal funds rate. however, theory and empirical evidence indicate that longer - term interest rates and conditions in other financial markets matter most for the transmission of monetary policy to the economy. those longer - term rates and other financial asset prices, in turn, reflect expectations of future short - term rates as well as premiums for uncertainty. if the monetary authority can be more open about what it is doing and why and about how it perceives the economic outlook, then market participants can improve their expectations of future short rates, bringing the interest rates and financial prices that matter most for the economy closer into alignment with the intentions of central bankers. of course, those intentions are subject to uncertainty and to the constant flow of new information. but explaining decisions more fully allows market participants to better anticipate policy responses when unexpected developments take place. by accurately assessing the possible extent of policy reactions even before they occur, financial markets can speed needed economic adjustments. in sum, greater transparency allows