The economic environment we live in today is inherently dynamic and continuously evolving. We therefore need to be aware of both old and new challenges to inflation targeting as a monetary policy framework. Some observers have cautioned that Thailand’s inflation targeting regime has not been truly tested. In particular, there has not been an incident that gives rise to a severe tension between inflation stabilization and other objectives. For example, Thailand has not experienced sharp exchange rate movements that come into conflict with the inflation objective. Nor has the country been in a situation where persistent supply shocks lead to a significant slowdown of the economy amidst rising prices. Operationally, there are also issues on how far we should push transparency. A few inflation targeting central banks now put forecasts of policy rates in their inflation reports. Should Thailand follow these practices? Should we publish our MPC minutes as the FOMC does? And should we announce the weight we put on output gap stabilization relative to inflation stabilization explicitly in the inflation report. In the past, we only mentioned these weights occasionally in passing. All these questions will sooner or later have to be tackled when our inflation-targeting regime gains maturity. Ladies and gentlemen, The issues I have mentioned, as well as other challenges confronting the conduct of inflation targeting in emerging economies, are the main focus of this international symposium.
Tarisa Watanagase: Inflation targeting – a reflection on Thailand’s experience Opening remarks by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the Bank of Thailand’s International Symposium on “Challenges to Inflation Targeting in Emerging Market Countries,” Bangkok, 13 November 2006. *  *  *  Honorable Guests, Distinguished Participants, Ladies and Gentlemen, First, I would like to extend a very warm welcome to all of you here today. This is the second time that the Bank of Thailand organizes a symposium at an international level. Our first international symposium, “Practical Experiences on Inflation Targeting,” was held in October 2000, a few months after we had adopted inflation targeting as a new monetary policy framework for Thailand. But this symposium today is the first one that brings together central bank governors, senior central bank executives, world-renowned academics and policy experts from leading international organizations. Many of you have extremely tight schedules and some have to travel a very long distance. I would like to express our great appreciation for your presence and very much hope that what we will learn together in this symposium is beneficial to all of us. Ladies and Gentlemen, Thailand formally adopted inflation targeting as a monetary policy framework on May 23, 2000. The change in policy regime was a result of our search for an appropriate nominal anchor after the floating of the Thai baht in July 1997. In the interim period, we used monetary aggregates as our policy target.