Can Central Bank Transparency Go Too Far?

However, central banks can improve transparency in discussing that they do care about reducing output fluctuations . By describing procedures for how the path and horizon of inflation targets would be modified in the face of large shocks, by emphasizing that monetary policy will be just as vigilant in preventing inflation from falling too low as it is from preventing it from being too high, and by indicating that the central bank will pursue expansionary policies when output falls very far below potential, central banks can show that they do care about output fluctuations. These steps to improve transparency will increase support for the central bank's policies and independence, but avoid a focus on the short run that could interfere with the ability of the central bank to do its job effectively