, though i would hope it would pick up next year. as i've already mentioned, the impacts of the events i've been discussing have not been limited to the united states. although european growth has held up well so far, it now appears to be slowing, in part because the financial strains and rising commodity prices have weighed on consumer and business confidence and have weakened spending, but also as europe's housing markets cool, especially in the united kingdom, ireland, and spain. the headwinds from the financial turmoil i have described may affect them as well. in addition, monetary policy in europe has eased considerably less as inflation has continued to rise above central banks'targets, largely driven by continued sharp increases in commodity prices. one important factor behind developments in recent years has been the rapid growth in emerging market economies such as china. on the one hand, rapid growth in asia has stimulated strong increases in import demand, cushioning the slowdowns in the united states, europe and japan, but on the other hand, the rapid growth in demand has pushed up prices for commodities that are in short supply. thus, inflation rates in many emerging economies have risen sharply. the central banks in most parts of the world are at a crucial juncture : we must all be vigilant to keep inflation expectations anchored and inflation low. conclusion the recent financial turmoil has brought the federal reserve into uncharted waters. we found it necessary to build some lifeboats, but we seem to have steered clear of the worst weather. the measures taken by the federal reserve and other central banks seem to have helped keep the economy afloat, but this episode of financial distress has raised important questions about the structure of financial regulation and the appropriate role of the lender of last resort. we expect to strengthen the financial system with an array of regulatory changes, which includes strengthening of capital and liquidity rules, more disclosure requirements, closer supervision of the measurement and management of firm - wide risks, and steps to increase the transparency and resilience of the financial infrastructure. private investors and other market participants clearly also have crucial roles to play in strengthening the financial system. while the current turmoil is not yet over, we have seen some signs of improvement. we have learned much from this episode. i am confident that it will be studied for some time to come, and that we will forge a better financial system as a result. references greenlaw, david, jan hatzius, anil k. kashya

analysis of monetary policy. last year, the institute for monetary and economic studies of the bank of japan published a series of special edition newsletters entitled " the economics of climate change " to provide an easy - to - understand explanation of the current state of the economic analysis of climate change. bank of japan staff members have also deepened discussions with relevant experts, for example by actively participating in various study groups. i hope that the bank will continue to share its research and practical expertise widely and carry on with the mutual exchange of ideas between the bank and academia, and that academia continues to deepen its analyses of these issues, allowing the bank to incorporate the insights obtained into its own work. second, the analysis of the financial and economic impact of climate change issues requires collaboration with experts in the natural sciences. this certainly applies to scenario analysis. for instance, the extent to which policy responses limit increases in global temperatures and hence the extent to which natural disasters are prevented is important information for measuring the economic impact of policy responses. the ngfs, which provides climate change scenarios to measure future economic risks, is working with climate scientists to improve the scenarios. since climate change is both a global issue and at the same time something whose local impact varies considerably, there is a need for greater cooperation at the country or regional level between experts in the natural sciences and those examining the economic impact of climate change. the third challenge concerns enhancements in terms of financial analysis. various investments are needed to achieve net zero. as mentioned earlier, financing through financial institutions and financial markets is important to achieve such investments. a crucial aspect in this context is whether financial institutions'loan interest rates and the pricing of financial instruments adequately incorporate the risks and opportunities associated with dealing with climate change. the market functioning survey conducted by the bank of japan mentioned earlier also indicated that there was room for risks and opportunities to be incorporated in such prices of financial instruments to a greater extent. given the high uncertainty surrounding the risks and opportunities stemming from climate change, it may not be easy for markets to properly factor them in. nevertheless, as a variety of analytical methods are tested and as data continues to accumulate, the extent to which efforts to address climate change issues are reflected in the prices of financial instruments is likely to increase, and this will support the smooth supply of investment funds needed to achieve net zero. fourth, there are challenges in terms of the data. for example, to capture the physical risks associated with flood damage, not only data on the flood damage itself but