. consequently, at the end of the day inflation will in fact be equal to the target. in the world of rational expectations, the market forecasters immediately accommodate this experience and their next forecasts will already be equal to the target. facing market forecasts equal to the target, the central bank can infer nothing about the economy ’ s current state, which is of course inconsistent with the initial supposition that the central bank can infer the information about the economy ’ s current state from the market forecasts. put differently, once we admit that expectations are formed rationally, market forecasts cannot be used as pure information about the economy ’ s current state. understandably, we live in a world of information asymmetry and the rational expectations theory does not hold in its “ strong ” version. but in this case it can be shown that the rational expectations equilibrium does exist but is not unique. intuitively, the fact that the central bank uses for its decision - making market forecasts, which already implicitly assume certain central bank behaviour, could produce huge output and inflation volatility. former fed vice - chairman alan blinder wrote about this issue : “ this can create a dangerous ‘ dog chasing its tail ’ phenomenon wherein the market reacts, or rather overreacts, to perceptions about what the central bank might do, and the central bank looks to the markets for guidance about what it should do. ” bernanke and woodford call the situation a “ sunspot equilibrium ” in which the central bank responds to random variables only because it is expected to do so. the main message i would like to pass on to you tonight is that the uncertainty surrounding the evaluation of the economy ’ s current state cannot be solved simply by following the market expectation. as a straightforward implication i would like to stress that the central bank must rely primarily on its own evaluation of the economy ’ s current state. the central bank must both develop its own structural model of the economy and gather relevant information from a variety of sources. as a consequence, surprising the market is nothing the central bank should be blamed for, and the market should be prepared to face such surprises from time to time.

fund crisis in 1998 illustrated not only the risks of the spill - over of crises in emerging areas but also the fragility created by the advent of new players and the development of financial derivative instruments. this fragility was further underscored by the failure of enron in 2001. what are the prudential issues at stake in the recent developments in financial markets, particularly in the greater interdependence of national markets, the emergence of new instruments and new categories of economic operators in a context of increasing trading volumes? to find answers to some of these questions, the last session will take the form of a round table bringing together speakers from mature and emerging economies at different stages of integration into international trade, be they central bankers and / or from the private sector. it will afford an opportunity to discuss the consequences of the increasing global imbalances on international financial stability. stanley fischer will then provide a summary of the day ’ s work. it remains for me, ladies and gentlemen, to express my wish for this symposium to enable the further development and convergence of assessments of the current state of affairs and of economic policies. i wish you a fruitful day of discussions and now give the floor to president jean - claude trichet.