European Central Bank (ECB) President Mr Jean-Claude Trichet has said in Germany that clear communications play a central role for the efficiency and predictability of the bank's monetary policy.
In a speech that indicated the ECB has no plans for a hike in interest rates, he said that effective communication was therefore in a central bank's own interest.
"This helps anchor the inflation expectations of the financial markets and the public. Through efficient communication we can reduce inflation uncertainty and the costs associated with such uncertainty for consumers and investors," Mr Trichet said.
The ECB's monetary policy goal, strategy and actions were also clear, whereas a central bank that was not successful in communicating its principles would endanger its reputation over time, Mr Trichet said.
The ECB's self-imposed policy aim is to keep inflation below but close to 2 per cent, a goal it has not reached since 1999, the year the euro was launched.
Mr Trichet said communications were also vital to explaining what the ECB could not achieve.
"Monetary policy cannot offset short-term changes in the inflation rate which are caused by economic shocks, such as sharp oil price increases or higher administered prices," he said.
The public should remain confident that the ECB would be able to deliver stable prices over the medium term, despite such shocks, he said.
So far, the ECB has been able to meet expectations that it would execute a credible monetary policy and achieve price stability.
The yield curve for the 12 nations that joined the single currency converged on the best performer - the deutschemark - rather than an average of all the currencies joining the bloc, he said.