everything is different : the foreign exchange and financial markets are much more stable and the currencies sometimes face upward rather than downward pressure ; foreign direct investment and other capital inflow continues to grow with the accumulation of foreign reserves ; the banking system has been strengthened through restructuring ; and the economies have grown at a steady and sustainable pace of 5 % on average since 2000. while there were indescribable difficulties to overcome the adverse effects of the crisis, the present performance clearly demonstrates the success of policy efforts and the underlying dynamism of the economies. i hope the speeches by the governors will enlighten us about the changes in economies and dynamism after the crisis. 3. regional cooperation turning to policy coordination, the crisis became the starting point for various initiatives in the region. exposed to the weakness in the international financial architecture, the ministries of finance and central banks became aware of the importance of regional cooperation and began to address the source of weakness. the chiang mai initiative, as a complement to the imf facilities, was agreed upon among asean + 3 to build a framework of emergency liquidity support through a network of bilateral foreign exchange swap arrangements. based on the analysis of the crisis, efforts have been made to reduce over - reliance on the banking sector for financial intermediation. the asian bond markets initiatives ( abmi ) is another regional cooperation by asean + 3 to foster local capital markets. sharing the same objective with the abmi, the executives'meetings of east asia and pacific central banks, or emeap, consisting of eleven central banks and monetary authorities in the region, started the asian bond fund project. by utilizing some foreign reserves of member central banks collectively, the emeap launched two investment funds ; one for investing in us dollar - denominated public bonds issued by the member countries, and the other for investing in local currency - denominated public bonds, to help not only to provide a convenient and low - cost instrument for market participants but also to identify and remove impediments to the respective local markets. 4. future challenges for the asian economies and financial markets in line with the good performance of regional economies and the progress in policy coordination among central banks and monetary authorities, economic integration in the region is gradually taking root. it is reported that intra - regional trade in east asia has recently reached around half of the total, which is comparable to that of nafta and slightly less than that of the eu. bilateral and regional free trade agreements are

period. as inventory stocks move into better alignment with sales, firms should become more willing to increase production. we continue to expect overall economic activity to bottom out, and then to turn up later this year. our assessments that consumer spending and housing demand will stabilize and that the pace of inventory liquidation will slow are key building blocks of that forecast. final demand should also be supported by fiscal and monetary stimulus, and u. s. exports may benefit if recent signs of stabilization in foreign economic activity prove accurate. an important caveat is that our forecast also assumes continuing gradual repair of the financial system and an associated improvement in credit conditions ; a relapse in the financial sector would be a significant drag on economic activity and could cause the incipient recovery to stall. i will provide a brief update on financial markets in a moment. even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer - run potential for a while, implying that the current slack in resource utilization will increase further. we expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. in particular, businesses are likely to be cautious about hiring, and the unemployment rate is likely to rise for a time, even after economic growth resumes. in this environment, we anticipate that inflation will remain low. the slack in resource utilization remains sizable, and, notwithstanding recent increases in the prices of oil and other commodities, cost pressures generally remain subdued. as a consequence, inflation is likely to move down some over the next year relative to its pace in 2008. that said, improving economic conditions and stable inflation expectations should limit further declines in inflation. conditions in financial markets conditions in a number of financial markets have improved since earlier this year, likely reflecting both policy actions taken by the federal reserve and other agencies as well as the somewhat better economic outlook. nevertheless, financial markets and financial institutions remain under stress, and low asset prices and tight credit conditions continue to restrain economic activity. among the markets where functioning has improved recently are those for short - term funding, including the interbank lending markets and the commercial paper market. risk spreads in those markets appear to have moderated, and more lending is taking place at longer maturities. the better performance of short - term funding markets in part reflects the support afforded by federal reserve lending programs. it is encouraging that the private sector ’ s reliance on the fed ’ s programs has declined as market stresses have eased, an