However, considering the difficulty of accurately predicting economic developments, such action may not necessarily result in market confidence in the Bank’s policy. Nevertheless, it would be impossible to act pre-emptively if the Bank waited until a consensus was reached on future economic developments and desirable policy actions.
It is no exaggeration to say that the key to monetary policy management is in finding how these two requirements can be fulfilled simultaneously. Central banks have tried to meet the two requirements through various techniques. For example, many central banks in the past adopted “money supply targeting”, in which monetary policy is aimed at achieving an intermediate target of money supply growth.