Gonzalez-Paramo on the design of monetary policy

"Recent studies by academics have confirmed that the predictability of the ECB is at the highest level among major central banks. Investors have indeed become more confident in their forecasts of future short-term interest rate developments prior to ECB monetary policy announcements. Bond market indicators paint essentially the same picture. Implied bond market volatility in the euro area is currently close to its lowest level since January 1999."

"Evidence also suggests that the volatility of long-term bond futures prices increases around the time that the ECB makes its monetary policy announcements and holds its press conferences, suggesting that both of these events contain information that is relevant to bond markets. However, the increase in volatility is relatively muted and short-lived, which is consistent with the interpretation that the ECB's decisions and communication have, on the whole, been predictable."

Speech by Jose Manuel Gonzalez-Paramo, Member of the Executive Board of the ECB, European Economics and Financial Centre, London, 28 September 2006.

Click here to read the speech "Expectations, uncertainty and the design of monetary policy"