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Published on March 7, 2008

Over the next 180 days, the BOT will work closely with the Finance Ministry to ensure a smooth process for selecting new external members of its board and three policy committees for monetary, financial institutions and payments system. These external members, including the first outside chairman of the board, will be faces whom the people will count on to look after the country's economic and financial well-being on their behalf.

Public opinion is one of the most important matters of concern for the central bank. Public understanding of its policies is the foundation for it forming the right expectations of the future state of the economy. Indeed, the ultimate goal of the inflation-targeting framework is to ensure that the public expects that future prices will be relatively stable or at least increase at predictable rates. In planning ahead, the public can be reasonably certain that their future income will not be eaten up by paying more for the same amount

of goods and services they

enjoy today.

While preaching price stability, the BOT, like any other central bank in the world, also cares about income growth - the net or real income that helps breadwinners increase their real consumption over time. In this regard, differentiating between a growth-targeting policy and an inflation-targeting policy seems more a rhetorical argument than a substantive policy choice.

New laws and rhetorical arguments aside, breadwinners will carry on business as usual. Most likely, they won't be excited about the new central bank law. What the central bank does or can do is usually far removed from their daily concerns as long as their monthly incomes are healthy. Not that the general public is nonchalant about what the central bank does, but they are not usually excited by it.

It is an immense challenge for central bank communicators to find effective key messages and channels to communicate with the public. Appropriate timing for communication is particularly vital to avoid unnecessary misinterpretation and speculation about the central bank's actions, which could adversely affect market sentiment that may, in turn, undermine the effectiveness of policy measures for which such communication is intended.

More challenging is that stakeholders of the central bank are diverse. Keen central bank watchers, local and international, need to know that the central bank's actions conform to international best practices and are valid theoretically and empirically. At the same time, others need to be reassured that the central bank carries out duties free from politics, having weighed carefully trade-offs over the medium term and among various sectors of the economy.

Having said all this, while communicating central bank policies is a very challenging task, it is one that must be pursued with greater efforts going forward.

Chirathep Senivongs Na Ayudhya is Division Executive for External Communications

Bank of Thailand

(The views expressed are the author's only.)