A credible central bank, where inflation expectations are anchored, will experience a smaller pass-through coefficient from the exchange rate to inflation. This allows the central bank to respond with more flexibility to shocks requiring a real exchange rate depreciation. To summarize, if there is confidence in the central bank’s anti-inflationary commitment, the central bank can react more flexibly to various shocks and, in this way, minimize deviations of output from its potential level. The central bank can smooth the business cycle while preserving price stability. The key element in this strategy is the credibility of the central bank’s commitment to price stability, for which communication and transparency are crucial. Autonomy and transparency Autonomy means that the State delegates to the central bank the administration of monetary policy, such that it be applied using technical criteria and with a medium-term horizon. Here is the first reason why central banks must be transparent: to preserve the legitimacy that an autonomous institution must have in a democratic regime, particularly one whose decisions have important implications on the nation’s well-being. Autonomous institutions must properly inform the country of their actions. In Chile, the delivery of information is determined in the Basic Constitutional Act, which establishes that, once a year, the Bank must inform the President of the Republic and the Senate about the general policies and regulations it dictates in exercising its mandate.
Our efforts should not be just about coping with short-term fluctuations, but also about laying long-term foundation for Thailand’s future. That requires a forward-looking plan of  BIS central bankers’ speeches  3  action by all stakeholders. The Bank of Thailand, for our part, will continue to ensure a stable financial and economic environment, so that businesses can continue to thrive and individuals can enjoy better standards of living on a sustainable basis. Thank you and wish you all an enjoyable evening. 4  BIS central bankers’ speeches