This has become conventional wisdom nowadays and rightly so. Credibility greatly facilitates the conditions for, and enhances the effectiveness of, monetary policy. Once the public is convinced of the central bank’s commitment to preserving price stability, they will act - for example, in wage and price-setting - in a way that facilitates the achievement of this goal.
A virtuous cycle is created, which is conducive to creating an environment of stable prices in which economic activity can flourish. Third, the Treaty clearly recognises that assigning an important public policy to an independent institution has to be accompanied by transparent and accountable policy design and implementation.