to try to bring the rate back gradually within the range, and if possible to the midpoint of the range, with a one year forward horizon. the underlying reason for this approach is to avoid causing inflation volatility by sharp changes in the interest rate. take the following situation as a hypothetical example : the bank of israel is acting to keep inflation in the next twelve months close to the midpoint of the target, i. e., 2 percent a year. but let us say that in the next ten months the rolling twelve - month inflation rate is below the lower limit of the range because of the drop in the index of 1. 5 percent in september and october mentioned above. we may only see the twelve - month retrospective inflation rate within the target when those two months have dropped out of the calculation. we could have acted differently and reduced the interest rate drastically to bring inflation back within the target much more quickly, but then we could have created an unstable process of overshooting in the opposite direction, with inflation exceeding the target. it is therefore not worthwhile reacting to every shock as it occurs, but it is preferable to persist with the policy of gradually reverting to the inflation target within a year. b. the openness of the economy now to my main topic for today, the openness of israel ’ s economy to the global economy. this is an important issue because economic openness is a new reality that affects all of us, but we may not have internalized it in all areas. this conference, and others like it, take pride in the many and important participants from abroad, and this provides one indication of the new reality in which we live. israel was one of the first countries to realize that a small economy cannot grow without being open to and participating in the global economy. as early as the 1960s we set out on the path of liberalization of international trade. but the program of exposing the economy to abroad in the mid - 1980s and the liberalization of the foreign currency market and capital flows initiated by the bank of israel in the 1990s were the most significant aspects of this process. it was not just that they opened the economy to the global economy, but they created a framework for macroeconomic policy that operates according to the norms accepted in the advanced economies, based on budget and inflation targeting. this provides the infrastructure that enables the economy to achieve sustained growth, provided that the policymakers know how to face the challenges that it places before them. this

standards to be required from the new members. these decisions are expected to be taken shortly before the conference of ministers in may 2007. acceptance of a new member country requires a consensus among the member countries. professionals and specialists in the government, the bank of israel and other relevant bodies are in contact with the oecd with regard to israel ’ s acceptance as a full member, and we hope there will be a consensus among existing members on the question of our membership. it is important that israel ’ s membership of the oecd remain high on the agenda of the various entities involved in this matter, and that progress is made in the areas that need special attention. this is a significant stage in the integration of israel as an open, modern economy into the global economy. i hope we make it. thank you.