According to studies carried out at the Banque de France 1 , the disinflationary impact of imports appears to be relatively independent of import volumes: the mere existence of potential competition renders the markets, in the words of experts, more “contestable” and influences behavioural patterns. These disinflationary forces are still present. However, there are now other more powerful forces that have the opposite effect. The growth of emerging market economies and the rise in the living standards of their populations are leading to a surge in the demand for natural resources, food and energy, which logically has a strong and permanent impact on inflation. Furthermore, by strengthening the magnitude of global shocks in relation to more specifically domestic shocks and favouring the international transmission of the latter, globalisation introduces a much greater synchronisation of inflationary cycles between countries, with the ensuing risks of amplification. Overall, the effects of globalisation have ceased – probably in the long term – to be spontaneously disinflationary. The second topic that I wish to discuss concerns globalisation and financial innovation. There is, in my mind, no doubt about the long-term benefits of the financial innovation process that we have been witnessing over the past twenty years. However, we can also see that it may be accompanied by cyclical developments and structural changes that could potentially prove to be disruptive for monetary policy. Monetary and financial conditions are simultaneously influenced by central bank decisions, but are also increasingly affected by sometimes exogenous trends in asset prices and the pricing of risk.

Jacob, like a number of others here today, epitomises the diversity of the origins of the participants in this symposium since he has served on the faculty of the University of Chicago, was the Economic Counselor and Director of Research at the International Monetary Fund and the former Governor of the Bank of Israel, and is now the Chairman of the Group of Thirty and Vice Chairman of American International Group (AIG). I will now simply make a few brief introductory remarks. Our colleague Mervyn King often says that monetary policy should be "boring". This is certainly not the case today. Monetary policy is interesting. But it is also, and above all, difficult. In many respects, to put it informally, the good times are behind us. Globalisation has no doubt considerably helped central banks over the past decade. Today, this is less clear cut. We are facing a combination of two difficulties. First, at present, for all countries, the risks for growth are on the downside and for inflation on the upside. Beyond the diversity of their mandates, this represents a common challenge for all central banks. Second, because we are all affected, to differing degrees, by the turmoil of the past eight months in the credit markets. In the coming hours we shall hold an in-depth debate on the relationship between financial stability and price stability. But I believe that we will all agree that the conduct of monetary policy is more difficult and more uncertain in a less stable and more volatile financial environment.