In addition, we have  2  BIS Review 53/2002  adopted 14-day repurchase rate as the policy instrument as well as employed macro econometric model to conduct the forecast. Permit me to elaborate on some of the above mentioned issues with regard to the implementation of inflation targeting framework. The appropriate price index used was consumer price index (CPI) which should be excluding some items that cannot be influenced by monetary policy while still able to retain sufficient price information. Hence we used the core inflation which excludes volatile items of raw food and oil prices. This core inflation has less variation but from historical data, on average, it had been close to the headline inflation in the long run. We can say that targeting the core inflation is effectively the control of long-run inflation such that monetary policy does not have to accommodate supply shocks. In light of this, the target range of 0-3.5 percent was set based on Thailand and our major trading partners' history of inflation. As for the choice of policy rate, the 14-day repurchase rate was selected as the key instrument. With this instrument, the Bank of Thailand is able to manage the appropriate level of liquidity in the market. The advantage of 14-day repurchase rate over other rates of longer maturities is that the trading volume is much higher and thus provides effective policy signaling to the market.
And while the ECB’s (European Central Bank) framework is less focused on quantitative targets, there is little doubt that the ECB’s willingness to expand its balance sheet through lending and through the OMT (Outright Monetary Transactions program) has been a key support to stability. This activism has some observers asking – with some justification in my view – whether central banks are trying to do too much. Concerns are being raised as to whether price stability and financial stability are being put at risk, and about potential spillovers into currency markets. Monetary policy is, after all, a blunt instrument. It supports investment and consumption in the real side of the economy by stimulating financial activity, by lowering borrowing costs and boosting financial wealth. But, as we have learned the hard way, easy monetary and credit conditions are also the stuff out of which credit excesses and bubbles can form So the question many central banks face is whether the benefits of further easing are worth the potential costs: in essence, will we get enough risk-taking on the real side of the economy, before we get too much on the financial side? Of course, this is not a static calculation. Sound structural policy can improve the odds that monetary stimulus feeds through to the real economy. After all, firms’ decisions to invest, hire more workers and expand their operations depend not just on the cost and availability of funds, but also on the opportunities and the uncertainties in the business environment.