The best environment that the central bank can provide for the economy to attain a high level of output and steady growth is one with price stability. Under inflation targeting, the Monetary Policy Board has to look ahead 18-24 months and adjust its stance today to influence the outcome of the future. This will help minimize the boom and bust phenomenon. The floating exchange rate regime will also help prevent imbalances from building up excessively, hence minimizing the risk of major crises. In terms of transparency and accountability, inflation targeting is probably the best tool of communication. While the general public may have difficulty understanding and keeping track of monetary growth targets, it fully understands inflation, the index of which is calculated and announced by an independent agency, in the case of Thailand the Ministry of Commerce. The regular publication of inflation reports will also help inform and educate the public much better than in the past. In the case of Thailand, inflation targeting is the best tool to ensure high output, sustainable growth, export competitiveness, prevention of a worsening of income distribution and a transparent and accountable central bank. The Bank of Thailand last year announced our explicit intention to control inflation, and the range of 0 to 3.5% of core inflation was announced in 23 May 2000. Since the beginning of the year, we have seen the yield on 10-year bonds drop from 7.91% per annum to 6.1%.
My second congratulation is also for Governor Paul Acquah for having achieved the Central Bank independence. I have noted that the Bank of Ghana was established in 1957. The Bank of Thailand was established in 1942 and we have not managed to gain independence through legal means yet. So, you are one up on us. Ladies and Gentlemen, the issue of “Central Bank Independence and Monetary Policy” is very much closed to the heart of all central bankers, and I am very happy to be able to share some thoughts on it. In Thailand's case this issue has been much discussed among all concerned throughout the 60 years period since the Bank of Thailand's establishment in 1942. One of the most famous governors of the Bank of Thailand and certainly the longest serving Governor (more than 10 years) had this to say about central bank independence and I quote “…If the policy in question is so profound that it might undermine principles or lead to catastrophe, the Central Bank Governor may not only voice his disapproval against it, but he also has the ultimate prerogative of resigning from the governorship”. Dr. Puey Ungphakorn was an outstanding Governor who gave great importance to the Bank of Thailand to carry out its functions as an independent institution free from political and governmental domination, undaunted by any influential powers-that-be. For the sake of his country-and using the delicate art of being a central banker, Dr. Puey protested against the government whenever it did not act righteously.