At the heart of debates about climate change, the Chilcot Inquiry into the war in Iraq, and the speed of the necessary fiscal consolidation of our public finances, lie questions about how to evaluate and respond to considerable uncertainties. At that seminar in 2005, we discussed three questions. First, in modelling the phenomenon of interest, what is the right balance between simplifying assumptions and technical rigour? Second, how open should we be about what we don’t really know? Third, in communicating uncertainty, how can we prevent the intended audience from focussing excessively on one or two parameters of the underlying distribution at the expense of the whole picture? The discussions compared the Bank of England’s fan charts for the outlook for inflation with the Met Office’s plume charts for forecasts of temperature. This paper updates that discussion, and presents some new ways of communicating uncertainty which are under evaluation by the Monetary Policy Committee. Reference to economics and meteorology is not just because the interests of some of us span both. They are two disciplines united by a common need to grapple with complex systems and communicate forecasts to a wide audience. It is not enough to explain only to experts. Much of the value of forecasts is in their being understood – in all their subtleties – by the general public, or at least sub-groups such as the agricultural industry in the case of meteorology and those involved in wage bargaining in the case of economics.
Policy implementation in 2011 Looking back at 2011, the BOT implemented our monetary policy to ensure stability against the backdrop of robust economic expansion in the first three quarters of the year. Thus, we continued to normalize the policy rate, as I had stated in last year’s policy statement. After the economy was hit hard by the flood crisis amid the stagnating global economy in the final quarter, the BOT policy was adapted to the changing circumstances, evidenced by the Monetary Policy Committee’s (MPC) decision to lower the policy rate in the last meeting of the year. Throughout last year, the BOT also paid particular attention to policies that facilitate businesses in normal times and in crisis times. These included policies that ensure the exchange rate movements consistent with the underlying economic fundamentals and that its volatility remained manageable by Thai businesses. Moreover, our policy on financial sector regulation and supervision has ensured that Thai financial institutions maintain their status as a credible and efficient financial intermediary and able to meet private sector demands. These efforts included encouraging financial institutions to rationalize their transaction fees structure, introducing digital cheque-imaging system, and relaxing certain measures related to financial institutions to alleviate financial burdens of flood-affected victims. Economic conditions and challenges for 2012 The path towards the future is not a smooth one. Ongoing challenges from the past and new challenges will increase obstacles for the Thai economy. Domestic issues still remain an important hurdle while emerging external issues have created new challenges.