management approach to monetary policy. it allows for an early assessment and detection of potential imbalances. it sheds light on those risks at a longer time horizon than the one usually contemplated by monetary policy, but still relevant for the ultimate objective of price stability. this is of special significance and importance when financial imbalances build up in the economy, which are fueled by excess money or liquidity growth. unwinding of those imbalances can be brutal and discontinuous – the so called non linear reaction – and, as such, very destabilizing. empirical evidence suggests that asset booms have typically occurred when money and credit growth were above their long - term average. whatever the loss function and ultimate objectives of central bankers, all would agree that monetary policy should not willingly contribute to the formation of such credit and asset booms. to make best use of the informational role of money, however, we have to face numerous and increasing challenges one major difficulty is to identify in real time the nature of monetary developments and their implications for future price developments. the challenge of monetary analysis is to see through the noise in monetary data to recover those underlying trends which are relevant for monetary policy decisions. meeting this challenge has not been straightforward in recent years as the euro area economy was hit by several shocks : financial instability in the aftermath of the stock market collapse in 2000, exceptionally high economic and geopolitical uncertainty between 2001 and 2003, just to name a few. first of all, short - run monetary developments are often affected by transitory shocks. we need to identify and account for such temporary “ special factors ” or “ distortions ” that may affect monetary developments and blur their information content. to some extent it is the aim of the methodology developed at the ecb which allows for periodic adjustments to measured monetary aggregates in order to account for portfolio shifts which impact the demand for money without any incidence on future inflation. this approach has met with great success in the period 2000 - 2004. second, and more permanently, it is necessary to disentangle, in monetary and credit evolutions, those which reflect structural and permanent changes from those which simply result from moves in the level of interest rates and the position in the economic cycle. here, no mechanistic or ad hoc approach would do the trick. we need to look at the fundamental determinants of money demand. ideally, we should have a full and comprehensive model of portfolio allocation and choices which, as an aside, would produce

records turing ’ s birth date in binary code. in the background are images of the ace pilot machine and a section from the technical drawings of the bombe. the portrait is by elliott and fry, and the quote is from an interview published in the times, dated 11 june 1949. * * * * * * * * the characters on our banknotes celebrate those who have advanced british thought, spurred innovation, shown exceptional leadership, shaped this diverse society and forged our common values. alan turing will join winston churchill on the £5 note and jane austen on the £10, and jmw turner who will make his appearance on the new £20 next year. although we look to history when we chose a new character, turing ’ s work inspires us to look to the future and imagine what is still to come as a result of his genius. if anyone can see the future, it ’ s the next speaker. it is my pleasure to welcome demis hassabis – artificial intelligence researcher, neuroscientist, video game designer, chess champion, co - founder of deepmind and one of the 225, 000 who submitted a recommendation to this process – to celebrate turing ’ s past contributions to science and venture where they might take us tomorrow. all speeches are available online at www. bankofengland. co. uk / news / speeches