some parts of the euro area, these problems are compounded by a very restrictive credit supply of banks. these challenges cannot be overcome by monetary policy. all that central banks can do is to buy time – time for governments and parliaments to consolidate budgets, improve the functioning of product and labour markets and recapitalize banks. in safeguarding monetary and financial stability, central banks can pave the way for growth. but to actually get there, governments and parliaments must go down the route of implementing the required reforms. bis central bankers ’ speeches

% over the whole period compared with our long term trend rate of 2¼2½ %. employment has steadily increased, and unemployment has fallen to its lowest level for 25 years. while the rate of inflation has been consistently relatively close either side of the government's 2½ % target - the lowest rate that i suspect most of us can remember. this experience demonstrates at least to my mind - that there is no necessary trade - off between growth and stability - certainly in the medium and longer term, rather the reverse. and i would hope, on this evidence, that the future evolution of our approach to overall economic management would be in the direction of further improvements to our supply - side flexibility, rather than any retreat from the present emphasis on macro - economic stability. of course i am well aware that a stable overall macro - economy does not - and cannot - mean equally stable economic conditions for every individual sector or individual business. a particular complication over the past few years has been the surprisingly persistent strength of the exchange rate against the euro, itself a reflection of the puzzling more general weakness of the european currency. this has contributed to an uncomfortable imbalance within the uk economy primarily between the euro - exposed sectors, which have been under consistent pressure, and the domestically - oriented sectors, which have by and large been doing relatively well. understandably the suffering sectors and businesses tend to complain that monetary policy takes too little account of their position, often pointing out that inflation has for the past two years fallen somewhat below the target. the implication is that monetary policy has been tighter - interest rates have been higher - than was necessary, which, they say, in turn at least helps to explain the behaviour of the exchange rate. i hope you won't think me patronising if i tell you that i have genuine sympathy with their concerns. indeed i very much admire the huge efforts that many of them have made to overcome the disadvantage coming from the strong exchange rate. imbalance within the economy has in fact been a persistent pre - occupation for us on the mpc. we necessarily, of course, take account of the exchange rate in trying to predict the future course of the economy. its strength against the euro has been a factor which has dampened both external demand and the rate of inflation, so that interest rates have certainly been lower than they would have been if the exchange rate had been weaker. it is nevertheless true that, in common with most other analysts, we have not fully anticipated the persistence of