Communicating about the principles that govern the strategy makes the process of adjustment more rapid and less painful. A growing body of empirical evidence supports the conjecture that transparent quantitative objectives and communication about the strategy reinforces monetary policy.
Empirical findings confirm that a precise definition of price stability, or the announcement of an inflation target, lowers inflation expectations, helps to anchor them at levels consistent with the central bank’s preferences and reduces the sensitivity of inflation expectations to past inflation and other macroeconomic news. 6 The anchoring power of a quantitative objective is indeed remarkable.