fit their livelihood. secondly, to ensure quality of usage, we need to enhance financial literacy. with higher financial literacy, the poor could utilize the services more efficiently and productively, for example, having the ability to turn received credits into income and savings and so on. finally, we need a good system of consumer protection in order to ensure fair and transparent provision of financial services. i believe that financial regulators have an important role to play in all three areas. the fact that we are all here today, already signifies our commitment to addressing such issues, thus ascertaining the success of financial inclusion. not just for our own sake, but also for the sake of our friends around the world. after having seen this morning ’ s agenda, i am certain that there will be plenty of great discussions among us today. i myself am very interested to hear us take the current policy challenges further, arriving at how best we think afi can play a role in tackling such issues. of course, us working together to ensure the sustainability of the afi community together with our policy impact would also be key. i look forward to discussing our proposals of potential afi flagship projects, all of which, i believe would make significant contributions to the global efforts on financial inclusion. in this connection, the bank of thailand will be presenting our proposal on “ using survey data to design financial inclusion policy ” for your consideration. the project findings would not only provide a useful international research contribution in the area of financial inclusion, but also an easily replicable exercise for anyone to conduct and repeat over time, thus adding to the stock of critical grass - root information on financial access. finally, i also look forward to discussing with you on the governance and other related issues of our start - up committee. without further ado, let us now give our attention to alfred who will be updating us on afi ’ s latest progress and lead us through the rest of today ’ s agenda. thank you for your attention. alfred, the floor is yours.

, economic forecasting is difficult and imprecise. in practice, it can sometimes be hard for the forecasters to make a confident call that higher or lower inflation is on the cards until it is imminent or even under way. similar problems characterise forecasts for other variables. this is just inherent in the forecasting process. one reason is that there are a host of potential factors which cannot be incorporated easily in a numerical forecast. unexpected changes in exchange rates, bond rates, property prices and share prices, the effects of financial structure changes, and so on can have important effects. typically, they are assumed not to occur for the purposes of making formal forecasts. even when changes are observed, their effects can in some cases be particularly difficult to quantify. hence, they are normally listed under ‘ risks ’. this doesn ’ t mean we should disregard forecasts or try to make policy without them. but it does mean that policymakers cannot assume that the forecasts will give a signal which is sufficiently reliable on its own to be the sole basis for policy. it also means that risks often feature more prominently in policy deliberations than do the forecasts themselves. in principle, the central bank is seeking to solve a dynamic optimisation problem in which the variability of the whole path of prices around the target ( and the variability of output ) is minimised, in expectation, by the path of interest rates we choose. this is an appropriate moment at which to deal with an argument which is sometimes heard, that our 2 - 3 per cent average inflation target means that we should tighten policy if, but only if, our forecast for inflation exceeds 3 per cent. by the same logic, we should ease policy if, and only if, the forecast is less than 2 per cent. this interprets the 2 - 3 per cent specification not so much as a target to be achieved on average, as a zone of inaction for policy : do nothing until a trigger point is reached, regardless of the level of interest rates currently in place. i think this is not the right way to operate policy. to see why, remember that it is the level of interest rates which matters. to be sure, changes in interest rates make the news, and may well have some announcement effect in themselves - mainly if they shift expectations about the level of interest rates in the future. but monetary policy does not stop working when the changes in interest rates stop. a persistently higher or lower level of interest