twelve agencies, in general staffed by long - serving bank of england people, constantly collecting information at the grass - roots level from their many business contacts. and the information, which they provide direct to the mpc on a monthly basis, can often prove helpful : either in helping us unravel inconsistencies in the data ; or, as was the case in the summer and autumn of 1998, alerting us to problems in the economy before they show up in the official data. notwithstanding the help of the agents, problems with interpretation of the data abound. some of these will be discussed in our quarterly inflation report, due to be published on thursday this week. i hope you will have the opportunity to read it. financial stability perhaps i could now turn from monetary policy matters to financial stability ; and to the second part of my job as the deputy governor responsible for this part of the bank ’ s work. go back a little over three years and the bank had a large department with four hundred and fifty staff supervising banks. hard on the heels of the decision to grant the bank independence, the government decided in may 1997 to establish the financial services authority bringing together existing uk financial regulators and supervisors under one roof. the decision was intended to streamline the uk regulatory framework and, recognising that the distinction between different types of financial firms had begun to blur, to bring together financial regulation in a single organisation and under a single piece of legislation, the financial services and markets act. in a world crowded with acronyms, this gave an opportunity for something of a cull, consigning the numerous self - regulatory organisations or sros - like sfa, imro and pia to history! however, while you may be able to take financial supervisors ( quite literally ) out of a central bank, you cannot remove all responsibility from a central bank for the safe - running of the financial 7 system. the bank stands at the heart of the financial system not only in the implementation of monetary policy, monitoring the financial intermediaries that make up the transmission mechanism for policy changes, but also operationally, as a market participant : on a daily basis carrying out open market operations or providing final settlement for payment systems across accounts at the bank ; or, in more extreme circumstances, intervening in the market to support the currency or to provide liquidity to a bank in difficulty. thus, while responsibility for supervision of individual banks has moved to canary wharf, the bank has retained responsibility for maintaining the

inflation profile consistent with the target. and so there can be differences between those who might at any moment prefer to wait and see - recognising that this might require a sharper movement in interest rates later on - and those who might prefer a more pre - emptive activist approach to setting rates, what might be termed the macbeth school of economics : “ if it were done when ‘ tis done, then ‘ t ’ were well it were done quickly ”. the fact that there are different paths to achieve the 2. 5 % target is one reason why there is no automatic link between our inflation forecast, which we publish on a quarterly basis, and that month ’ s interest rate decision. i mentioned that the setting of interest rates requires one to peer into the future. unfortunately it is more difficult than that. it also requires policy makers to have a view about what is happening currently. there is often considerable uncertainty about what the current situation is - a particular problem relating to q3 as we try to assess the impact of the petrol price crisis in september. even the past is uncertain and we regularly receive from the ons revisions to past data about growth of different parts of the economy. as i look at the data each month, knowing that some of the dials are misreading, i am reminded of the saying : that the intelligent man knows that half the data he is looking at is false ; the brilliant man knows which half! more seriously we need to have in our mind a view about which data series are reliable and which are particularly erratic. happily the rpix data, our goal, is easily observable. but, by way of example, wages, which are a key piece of data, are much less easy to observe. and as we look at the average earnings data, we need to recognise that, not only is it difficult to measure and calculate, it will also occasionally exhibit “ noisy ” features that may obscure what is going on in the real economy. indeed, over the millennium period, as special y2k bonuses were being paid, it was very difficult to determine what represented real “ news ” about the economy, and what was mere “ noise ”. sitting at the controls of the aircraft, trying to pilot a sensible middle course between the extremes of unsustainable take - off and hard landing, we need “ eyes and ears ” on the ground. our network of bank of england agents is extremely important in this area. around the country we have