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 have genuine sympathy with their concerns, and i very much admire the huge efforts that many of the adversely affected businesses have made to overcome the disadvantage coming from the strong exchange rate. if it's any comfort, i can assure you, that the resulting imbalance within the economy has been a persistent pre - occupation also 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 euro weakness. we don't of course have a crystal ball – but even if we had, it is important to recognise that the link between relative interest rates and exchange rates is much more complicated – and indeed more unpredictable – than is often suggested. our own exchange rate against the euro today, for example, is stronger than it was before our reductions in interest rates this year ; and the dollar, too, is substantially stronger against the euro than it was before the much larger cuts in us interest rates. so, in setting interest rates, we can – and do – make allowance in our projections for what has happened, and, on a best guess, for what is likely to happen, to the exchange rate, and that may cause the exchange rate to soften or it may cause domestic demand growth to strengthen, thereby offsetting the exchange rate's dampening effect on the economy. but what we cannot do – any more than the ecb – is to target the exchange rate, without putting the stability of the economy as a whole at risk of re - emerging inflation. that would not be in the interests even of the internationally - exposed sectors of the economy except possibly in the short term. they operate in the same labour market as more domestically - oriented businesses ; and what matters to them is the real, rather than the nominal exchange rate, and it is not at all clear how that would be affected. mr chairman, given the uncertainties, i am reluctant to

abrupt retrenchment by consumers, and a significant shortfall on our inflation target, further ahead - would we be taking, and should we take, by cutting interest rates further now, to sustain consumer demand at the expense of a further build up of household debt and continuing increases in house prices, in order to maintain the growth of the overall economy? these are all difficult questions of degree. but you can be sure that my colleagues on the mpc will continue to monitor both the global and the domestic situation with their usual vigilance - and with an open mind. there ’ s no doubt that these are challenging times for all of us. but that should not obscure the fact that in terms of the overall economy - including here in the north west, things are better than they ’ ve been in a long while. and i am reasonably confident that we will find a way through the macro - economic, demand management, challenges. in the meantime there is a great deal that you can do - and are doing - yourselves, here in the north west, under the leadership of the nwda, in partnership with the other public authorities, the universities, and the private business sector, to identify - on the basis of your local knowledge - the particular obstacles to, and the particular opportunities for, creating a more positive and flexible supply - side environment for the future. in thanking you, bryan, once again for joining with us in hosting this dinner this evening, i wish you all possible success.