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.

Lastly, it is an indicator of underlying inflationary pressures – something that is indisputably necessary. It is possible, indeed, that globalisation reduces the sensitivity of inflation to domestic demand owing to the possibility of increased use of external supply. This leads to a degree of decoupling of the capacity utilisation rate and the level of inflation. Under these circumstances, Phillips curves flatten and the monitoring of instantaneous inflation is no longer sufficient to detect underlying pressures. Monetary analysis therefore provides an indispensable insight into inflation developments. The second issue concerns future developments in the world financial system. We are honoured to have among us today high-ranking policymakers and experts from both socalled industrialised countries and emerging economies. It seems clear that not everyone shares the same vision or the same approach to the processes of liberalisation and financial innovation. Yet our economies are increasingly interdependent and our financial markets ever more interconnected. It seems that the time has come to ask how, in the future, financial systems organised and regulated on such different bases and principles can co-exist, and what the systemic and macroeconomic consequences of this diversity will be. At a time when we are all reflecting on the role and future of the International Monetary Fund, this, it seems to me, is a major challenge that could be taken up by this institution. It remains, Ladies and Gentlemen, for me to hope that this symposium gives rise to fruitful exchanges and a deeper understanding of the links between globalisation, inflation and monetary policy.