since the very beginning and in 2003 suffices, taking into account what i have said on the permanent deepening and broadening of our analysis. ft : as you know, the market expectations are for an interest rate increase in june, and maybe another one by the end of the year. but the question in a lot of people ’ s minds is, if we are approaching a peak, and we might be at a period where rates are likely to stay at the same rate for some period of time, would you ever give any indication that we were entering that sort of a pause or have reached some sort of a plateau? jct : i have already said what i want to say as regards the second part of the year. as regards our own past of course similar questions have been asked several times, for instance : “ you are at the level of 2 per cent. will you remain at the level of 2 % for a long period of time, a considerable period of time, a short period of time, and so forth? ” as you know we refused to respond to those questions. we said, “ we will do what will be deemed necessary to ensure price stability ” and as a matter of fact we remained at that level for around two years. but we always said that the market should be fully aware of the fact that we could change our interest rates at any time. i called this posture “ credible alertness ”, and this was our constant mode. other central banks could have at the time a different conception of their medium term pre - commitment, saying that ” we will stay at this level for a considerable period of time ”, which was interpreted by the market as meaning something like more than six months, perhaps one year. you also had some central banks embarking on some more or less automatic instrumentation of their monetary policy, with periodic regular increases. we always refused to do that because we trusted it was not appropriate in our case. we always said : we will do what is necessary and we trust that we are sufficiently candid and transparent as regards our primary mandate, our definition of price stability and our monetary policy concept, for this to function correctly. and the fact is that we could function correctly with a correct understanding of the observers of the market. ft : are you concerned about the spanish property market? jct : the spanish property market, irish property market … ft : you were going to say the london property market, but we ’ re not in the euro yet

to develop these models to better incorporate financial factors. neither can it be required that the models capture serious financial crises. this would probably require the development of special analytical tools and models. the role of monetary policy must be developed and clarified. even if improved supervision and regulation enable us to reduce the risk of serious financial imbalances accumulating, monetary policy will still face difficult dilemmas. the financial markets have a remarkable capacity to develop continually and to find ways past regulation. consequently, we cannot rely on supervision and regulation always succeeding in preventing financial imbalances from arising. in the future, we will certainly continue to see various forms of bubbles, in which asset prices increase in a manner that is not sustainable over the long term, together with a rapid growth in credit. in such cases, the central banks must take a position regarding whether and to which extent monetary policy should consider this phenomenon. the debate regarding the extent to which monetary policy should attempt to counteract the unsustainable development of credit growth and asset prices – a policy often called “ leaning against the wind ” – has been spurred by the current crisis. those who have doubts about such a policy maintain that it may entail an unnecessarily tight monetary policy, with costs in the form of a low utilisation of resources and low inflation, at the same time as monetary policy is deemed to be a blunt instrument to use against financial imbalances. according to this assessment, it would require excessively large and costly interest rate increases to prevent these imbalances from arising. such imbalances, of course, frequently build up in lars e. o. svensson discusses this in more depth in his speech ” flexible inflation targeting : lessons from the financial crisis ”, held on 21 september 2009 at de nederlansche bank, amsterdam. times of great optimism and excessive future confidence, and, in such a situation, increased interest rates may have a limited effect on lending and asset prices. it is entirely possible – and, in my opinion, perhaps even likely – that this assessment is correct, but i would like to emphasise that there exists a significant degree of uncertainty at this point in time. so far, research has not had much to say about the ability of monetary policy to counteract financial imbalances. naturally, this observation also implies an argument against any policy that strongly advocates a monetary policy actively aimed at preventing financial imbalances. however, my view is that, in certain situations,