Ladies and Gentlemen, The economic prospects for 2005 will continue to be favourable. Despite some signs of slower global growth, this has not become a cause for concern as the underlying conditions in the global environment continue to remain supportive of growth. Positive developments are that income growth and job creation in the world's largest economy, the United States, has improved while growth in the Asian region also continues to be strong and mutually reinforcing. Despite higher commodity prices, inflationary pressures in the major economies remain moderate. While some countries have begun to raise interest rates, the environment has allowed the upward adjustments to be gradual and supportive of growth. Therefore, although the pace of world growth may moderate, global growth in 2005 will remain strong. The current global environment is however, affected by uncertainty arising from the global imbalances. The United States continues to record large deficits in the current and fiscal accounts. There has been extensive discussion by the global community on the nature of the adjustment that should take place. Currently, the discussion on the measures to address the existing imbalances appears to be skewed toward pressures for a realignment of exchange rates. Ultimately, these structural imbalances would have to be addressed by the countries where these imbalances exist. Exchange rates may be part of the solution but even so, they are only a small part of the solution. The issue of competitiveness however, requires more than just adjustments in exchange rates. It requires fundamental structural changes in the countries concerned.

Unlike inflation, where falling behind the curve would entail a degree of pain down the road when policy eventually needs to catch up, there is no catching up if we fall behind the curve on climate change. It is a one-shot game. And the consequences of getting it wrong would be catastrophic. Responding to climate change is not simply about taking into consideration the effects of the green transition on inflation, nor the possible repercussions of physical and transition risks on financial stability. But it is also about actively taking steps that helps influence the incentives and willingness of society to alter their behaviours in such a way that mitigates adverse climate change. The most impactful channel for central banks in this respect is through the financial system. Incentives, mindsets, and expertise in the financial sector must be geared so as to ensure that sufficient resources become available to finance the green transition. This requires a collaborative approach, both among agencies within a country, as well as internationally. Initiatives being pursued by bodies such as the Network of Central Banks and Supervisors for Greening the Financial System are therefore critical. Forging ahead amidst shifting grounds Mervyn King once said that central banking should be boring. There was a time when that was true. There may come a day when it is true again. But that is not today. The task at hand is far from straightforward. Maintaining economic and financial stability amidst the shifting fault lines will require a steady hand.