mechanism or at least a reliable model for forecasting medium to long - run inflation. the announcement of inflation targets communicates the central bank ’ s intentions to the financial markets and to the public, and in doing so helps to reduce uncertainty about the future course of inflation. many of the costs of inflation arise from this uncertainty or variability rather than from its level ; for example, uncertainty about inflation exacerbates the volatility of relative prices and increases the riskiness of non - indexed financial instruments and contracts set in nominal terms. by making explicit the central bank ’ s medium - term policy intentions, inflation targets improve planning in the private sector, enhance the public debate about the direction of monetary policy, and increase the accountability of the central bank. under an inflation targeting regime the central bank would be forced to calculate and publicize the long - run implications of its short - run actions, thus ensuring that they would be subject to public scrutiny and debate. to the extent that the central bank governors dislike admitting publicly that they may miss their long - run inflation targets, the existence of an inflation targeting framework provides an incentive for the central bank to limit its short - run opportunism. the advantage of the inflation targeting regime is its great emphasis on the regular communication with the public and transparency. this property plays an important role in the success of inflation targeting, particularly in the industrialized countries. the policy makers in the developed countries use every opportunity to communicate with public speeches, and takes a step further by way of inflation reports. transparency and openness of the operating framework of monetary policy can bring important credibility gains, and institutional arrangements such as greater independence of the central bank can be helpful in this regard. european central bank and central banks in the eu zone are good examples for a model. hence, it is perhaps not surprising that in many countries the adoption of official inflation targets has been accompanied by moves toward central bank independence and accountability. nowadays, central banks are increasingly publishing information on their policies that they would have considered state secrets only twenty years ago, like minutes of board meetings and policy models. the key for the success of inflation targeting is the existence of a strong institutional commitment to price stability. this is particularly important in emerging markets that have had a past history of monetary mismanagement. the institutional commitment involves having a central bank that : 1 ) is insulated from political interference ; 2 ) has full and exclusive control over the setting of monetary policy instruments and 3 ) has a mandate to achieve price

last ten years, both as regards their own national responsibilities and as regards their collegial responsibilities of peer surveillance in the eurogroup. this period is over. we expect from governments strict respect for the principle of budgetary discipline and effective mutual surveillance. the purchases made on the secondary market cannot be used to circumvent the fundamental principle of budgetary discipline. the securities markets programme strictly aims at correcting malfunctioning of markets. the prohibition of monetary financing underlines precisely the fact that budgetary discipline is of the utmost importance. we have taken note of the commitments of euro area governments to take all measures needed to meet their fiscal targets. we have also taken note of the precise additional commitments taken by some euro area governments to accelerate fiscal consolidation and to ensure the sustainability of their public finances. it is crucial that governments implement rigorously the measures needed to ensure fiscal sustainability. it is in the context of these commitments only that we have embarked on an intervention programme in the securities markets. the securities market programme is an extraordinary action, which was undertaken in the situation of severe tensions in financial markets. i would like to stress that the rigorous application of the adjustment programmes by governments is essential to guarantee the progressive return to a more normal functioning of financial markets. conclusion let me conclude. recent experience, since 2007, has demonstrated how important it is for all decision - makers to analyse lucidly the unexpected situations that they are facing and to act in a timely manner when needed. as soon as it became clear that the intensity of recent market disruptions could have implied very serious consequences for price stability in the euro area, we took firm action. as i have said time and again : we are permanently alert and always prepared to act when necessary. price stability is the central contribution, which monetary policy makes to economic growth, to job creation and to financial stability. our successful track record since the inception of the euro – both in terms of low inflation rates and well - anchored inflation expectations – is remarkable. since the inception of the euro, more than 11 years ago until april this year, the average annual inflation in the euro area was 1. 98 %. this is exactly in line with our definition of price stability and it is better than the achievement of any major central bank over a period of many decades, including the bundesbank. but the ecb ’ s measures cannot substitute for the actions required to address more deepseated and fundamental problems. it remains for others – national governments, regulators