mr. george comments briefly on the global economy and on recent economic performance in the united kingdom speech by the governor of the bank of england, mr. e. a. j. george, at the dinner with the lord mayor for bankers and merchants of the city of london on 11 / 6 / 98. the past year, since we last enjoyed the generous hospitality of the mansion house, on this great city of london occasion, has been a testing time. it has been characterised by major imbalances in both the global economy and here in the united kingdom - which have complicated the task of policy - makers everywhere, including the task of the bank of england ’ s now legitimised monetary policy committee. internationally there has been good news in the enviable performance of the united states - goldilocks - economy, with continuing robust domestic demand growth and further falls in unemployment, with so far remarkably little inflationary pressure. to the extent that this performance can be sustained, it provides substantial underpinning for the global economy as a whole. and there has been encouraging news, too, in the re - emergence of domestic demand growth in the continental european countries as they prepare to take the final step to monetary union. that is a promising context for the launch of a strong, credible, currency and i wish the european central bank every success in its historic task. domestic expansion with monetary stability within europe is in the interest of us all. elsewhere though the international situation has been decidedly less benign. a combination of financial fragility and weak business and consumer confidence has weighed heavily on the japanese economy, and on the yen ; and the financial thunderstorms, which broke initially last year over a number of other countries in asia, are still intermittently rumbling around the region and elsewhere. the economic fallout from these developments poses a serious downside risk to the growth of world activity and threatens the emergence of potentially large international payments imbalances. it is a dangerous environment. all of this has prompted a far - reaching re - examination of the international monetary structure, and in the meantime it presents the international monetary authorities with some difficult immediate management challenges. it also, of course, represents an uncertain international background for the conduct of monetary policy in this country. our own overall economic performance over the past year was again very encouraging. output growth ( on the latest data, to the first quarter of this year ) was 2. 9 % significantly above the rate of inflation ( measured by the gdp deflator

as policymakers, the most. let me now turn to those. our one bank research agenda is structured around five themes which span all aspects of central banking. the themes are broad. that reflects the diversity of our agenda. they focus on the interactions and intersections between policy areas. they emphasise new challenges and new directions, while recognising that familiar questions facing central banks remain no less important. today ’ s conference is organised around them. the first theme covers “ policy frameworks and interactions ” the re - emergence of macroprudential instruments as part of the policy armoury raises fundamental questions about the interaction of monetary policy, macroprudential policy, and microprudential policy. it is essential to improve our understanding of the relationship between credit cycles and systemic risks. since credit market developments both affect and reflect potential growth in the broader economy, they – and macroprudential measures to influence them – require careful study by financial and monetary policymakers alike. the advent of a new, enhanced policy toolkit raises vital questions about the effectiveness of individual policy tools ; their joint operation ; and how they interact domestically and across borders. the second theme covers “ evaluating regulation, resolution, and market structures ” the financial crisis precipitated a radical overhaul of the approach towards regulation, supervision and resolution. regulatory policies have shifted from a near - exclusive focus on microprudential resilience to a more balanced emphasis on minimising systemic risk. in the whirlwind of essential change, there has been, however, relatively little assessment of the overall effect of reform on the financial system as a whole. moreover, our understanding of the “ system ” must extend well beyond the banking sector to encompass the whole of market - based finance. the interplay between the reform process and the changing nature of financial intermediation also raises fundamental questions about how incentives and market structures might evolve and what policy might need to do to keep up. the third theme covers “ policy operationalization and implementation ” the practice of central banking constantly underscores that implementation and communication of policy can be as important as its design. during the crisis central banks around the world made extensive and imaginative use of their balance sheets in pursuit of their objectives. bis central bankers ’ speeches this extraordinary range of policy responses provides an unparalleled opportunity to take stock of what worked, and why. as ben bernanke observed “ the trouble with qe is it works in practice, but it doesn ’ t