both of which are relevant to setting policy. first, the balance of risks around the central projection, and second the general level of uncertainty. the committee regularly comments on the extent to which it believes the risks around the central projection are skewed – that is, tilted to the upside or the downside. and it has sometimes explained changes in interest rates by reference to changes in the balance of risk rather than changes in the central projection. in the latest inflation report, we commented that risks on our latest inflation forecasts were balanced, but those around the forecast for output were tilted to the downside. the width of the fan chart is an indication of the mpc ’ s level of uncertainty about the outlook. it ’ s significant that the mpc widened the gdp fan charts in november, and the cpi fan charts further out, and maintained these wider fans in february. another way of presenting the same information is this bar chart ( conditioned on market interest rates as in the february inflation report ). this brings out the significant probabilities ascribed to outcomes which are some way away from the central projections. so, for example, there is a less than a one - in - three chance that gdp growth will be in the range containing the committee ’ s central projection – between 2 and 3 % – in two years ’ time. we see a greater probability – around two - in - five – that growth will be somewhere below 2 %. on inflation, there ’ s only around a one - in - four chance that inflation will lie close to the central projection – that is, between 2 and 2. 5 %, but a more than one - in - three chance that it will be above 2. 5 %, and an almost 1 in 5 chance that it will be below 1. 5 %. as this illustrates, one implication of widening the fan charts has been to increase the perceived risk of some rather unattractive outcomes – either that growth slows too sharply, or that inflation does not return to target following an upward spike. in particular both the upper tail of the inflation forecast – where inflation expectations might well come seriously adrift – and the bottom tail of the output forecast – where there could be a risk of setting off a deflationary spiral – are to be avoided, if at all possible. in this situation, it is not unreasonable to suppose that the committee will be more sensitive than usual to changes in the balance of risks. since neither of the key risks to the outlook is

in case of poland, the liberalization of the labour market and increased participation rate is badly needed. fiscal reforms must concentrate on rationalising the spending and not just increasing taxes. privatisation needs to be completed and it should include the banking sector. we have to strengthen competition in fuel and energy sectors. legal framework needs to be adjusted to be more efficient. the earlier deadline of the entry to the eu could act as a powerful motivating device to complete those reforms. i am a great believer in the deadlines and i think they help to achieve success. delaying the entry could do more harm then good, as it could weaken the incentive to complete the necessary and often politically costly reforms. eighth, flexibility of the rate of exchange is a poor substitute for structural reforms. ninth, i agree there is evident fear among the certain existing eu members, including germany, that once poland, hungary, slovakia or latvia enter the emu, the euro could be weaken. i do not find any rational argument supporting this preposition. firstly, as i pointed out, earlier date of entry would mobilise the candidate countries to complete the structural reforms. secondly, candidate countries combined make up for only around 6 % of the enlarged eu gdp. any negative impact the enlargement might have, which is unlikely, in any case will be highly subdued. thirdly, i think the reason behind the relative weakness of the euro, is not greece or portugal or the other emu members but something different. the entry of poland and other countries into the emu, assuming they complete reforms, will not weaken the euro at all. finally, as for today there are differences in the rate of inflation given the bs effect in the emu countries, hence why should be a problem for others, with inflation only marginally different from the eu average, to join the eurozone? tenth, earlier entry of the candidate countries into emu would allow them to start reaping the related advantages ( more price transparency, reduced transformation costs, stronger macroeconomic framework ) at the earlier date. summarising, we should not oppose nominal and real convergence. one should not assume there is an unavoidable conflict between the two. firstly, results of nominal convergence, a low inflation rate among them, are one of the foundations of the long - term economic growth. secondly, the great harmoniser between the real and nominal convergence are the structural reforms. the more reforms one has implemented, the less costly the disin