This paper considers two challenges that improvements in private-sector information-processing capabilities may pose for the effectiveness of monetary policy.It first considers the consequences of improved information about central-bank actions, and argues that the management of expectations will become even more important to effective monetary policy.The paper next considers the consequences of the potential erosion of private-sector demand for central-bank money.This should not fundamentally impair the ability of central banks to achieve their stabilization objectives, though it may require a new approach to the implementation of monetary policy.The advantages of a "channel" system, in which central-bank standing facilities are the main tool used to control overnight interest rates, are discussed.
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