Transparency and public trust vital in drafting monetary policy says Deutsche Bundesbank director

Dr. Martin Pontzen

By Hiran H.Senewiratne-September 22, 2016, 9:13 pm 

Transparency and public trust are of paramount importance for the monetary policy of any country. It should be subjected to public criticism to highlight its drawback and issues, to enable the authorities to come out with a good monetary policy, Director, Deutsche Bundesbank, Germany, Dr. Martin Pontzen said.

"Today, Germany has one of the strongest monetary policies in the world, which evolved through many decades with conflicts. The conflicts between the Bundesbank and the German federal government are among the most absorbing chapters in Germany's monetary history, Pontzen said during a public lecture on Wednesday at the Center for Banking Studies, Rajagiriya. The lecture was organized by the Central Bank of Sri Lanka. The subject of the lecture was; ' No Successful Monetary Policy Without Conflict - The Historical Experience of the German Central Bank.'

He said that transparency and public trust while being absolutely necessary are to be valued above political appointments and positions, which change periodically. "But, the Central Bank should function as an independent body, without being subjected to political interference, he added.

Pontzen said that raising staffing levels in the public sector and additional public construction programmes were regarded as appropriate means of reviving flagging economies.

"The German Central Bank is independent of political instructions and its purpose is to support the government's general economic policy while safeguarding price stability. Therefore, the Central Bank should be free of political interference to prepare a strong and consistent monetary policy for a country, Pontzen explained.

"Our German economy was raised to the highest position with minimum resources and minimum political interference. These factors are required to prepare a strong monetory policy, the senior banker said.

Pontzen said that every monetary policy should be geared to maintain and properly manage inflation, employment and interest rates in order to achieve sustainable economic development.

He said that the first conflict between the Bundesbank and the federal government was provoked in 1956 by Federal Chancellor Konrad Adenauer, when he adjusted interest rates during the Korean crisis, that led to a dramatic rise in prices.