and stable inflation, with noticeable effects on economic welfare. i believe that those achievements are largely permanent. i further consider that, as stressed by alan blinder in the introduction to his insightful paper, the debate over some of the core principles for sound monetary policy practice seems to be resolved for now. for example, there is currently substantial agreement, both among academics and monetary authorities, on the need to provide central banks with sufficient formal and effective institutional independence, the superiority of interest - rate operational targets over quantitative instruments, and the pursuit of low inflation as the main objective for monetary policy. both trends - towards deeper and more integrated financial markets, at one end, and towards monetary policies clearly determined to deliver price stability, at the other - are important factors behind the sound macroeconomic performance recorded practically worldwide over the last decade. notwithstanding this positive view on the recent past, central banks must deploy their best efforts improving their monetary policy and regulatory and supervisory arrangements - to preserve and consolidate the attainments i mentioned, since various significant risks and challenges lie ahead. as stressed by frederic mishkin, the final success of the processes of financial liberalisation and globalisation in developing economies hinges crucially on the ability of both policymakers and the private sector to properly respond to a rapidly changing environment. no doubt, the spirit of this proposition applies likewise to developed countries. an increasingly liberalised and globalised financial system necessitates a reconsideration of some key inputs in our current monetary strategies. the greater relevance of markets and their evolving nature requires an ongoing assessment of the different monetary policy transmission mechanisms. this area, while critical to successful monetary policy decision - making, still remains shrouded in considerable uncertainty. undoubtedly, the emergence of new financial assets and financial intermediaries poses fresh questions here. furthermore, the magnitude of the financial funds flowing across different countries at the present time and the uncertainty surrounding the sustainability and the possible effects of an eventual correction of the so - called global imbalances means that central banks worldwide must take a much broader and complex set of indicators into consideration when formulating their policies. moreover, we are probably at a juncture that can be best described as one of “ knightian uncertainty ”, in that some of the risks we are facing, and the hypothetical consequences following their realisation, are essentially immeasurable. consequently, good monetary policymaking requires not only a continuous reassessment of market conditions and expectations, but also forecasts and projections flexible enough to encompass

us federal reserve has been pursuing a strongly expansionary monetary policy. in this connection it has resorted to a wide array of both conventional and less conventional measures. the federal reserve cut its official interest rates successively until placing them at their natural lower bound, i. e. close to zero, and it embarked on massive securities purchase programmes that substantially expanded its balance sheet. it also pursued a forward guidance strategy, aimed at conveying its intention to maintain monetary expansion for a prolonged period. bis central bankers ’ speeches in may last year, given the evident improvement in the economic situation, the federal reserve communicated its intention to begin tapering, or gradually reducing the intensity of its expansionary impulses through cutting its monthly volumes of securities purchases. following a period of some confusion around the month of may 2013 ( which impacted the markets to some extent ), this strategy has progressively taken root. the challenge the federal reserve faces in these circumstances is no longer that of a change in monetary tack, but how to trim its expansionary monetary stance, in line with the improvement in the economy ’ s cyclical position, without endangering economic recovery, which is still not perceived as sufficiently firm. this is a complex challenge that fuels market uncertainty and affects the margin for manoeuvre of other central banks. the monetary policy of the bank of england the situation of the bank of england is somewhat different. like the federal reserve, it also exhausted its scope for conventional measures and likewise resorted intensely to securities purchase programmes and to forward guidance. furthermore, the bank of england pioneered the implementation of measures aimed directly at boosting lending to specific sectors through its funding for lending programme. in short, this programme enabled the institutions most active in specific credit market segments to obtain financing at the central bank at a lower cost. the pick - up in economic activity in the united kingdom has been sharper than in the united states and, according to most analysts, it appears to be underpinned by sounder foundations. inflation is holding on a path consistent with the target of 2 % and it should also be borne in mind that the prices of certain assets, housing in particular, have been moving on a rising trend and have reignited debate on the role the central bank and its monetary policy should play in preventing potential bubbles. here, although the bank of england has not yet modified its accommodative monetary policy stance either, the prevailing expectations are already discounting a more or less immediate change. the latest messages from the bank