factors, including the large outstanding debt position of corporate and household sectors ; investment in the uk might remain subdued ; or the weakness in pricing pressures we have seen over the past year or so may persist. but on the upside, the us might bounce back more rapidly than anticipated ; consumption growth might remain robust ; or the sterling exchange rate might begin to adjust downwards. against this background of risks, it is quite possible we may see rates at current levels for some time until the way ahead is clearer. but, as you know, economic events have a habit of developing quite rapidly, so even short term predictions are never easy. for our part, we will continue to assess the case for interest rate changes on a month - by - month basis. in carrying out our task, the mpc relies heavily on having the very best information at our disposal, and in that we are enormously assisted by our network of regional agencies. each month, our agents drive thousands of miles, eat hundreds of rushed sandwich lunches and, on occasion, no doubt push your goodwill to the limit as they seek out the latest news on developments in your businesses. nigel falls, our local agent, is here with me tonight, and for those of you who have not already met him i really do encourage you to do so after the dinner. agents attend the monthly briefing in threadneedle street ahead of each policy meeting, so information from their contacts is fed directly into the heart of the policy process. i know i speak for all of my colleagues on the mpc when i say that we really do find this a crucial barometer of current events, so i hope you will feel that a short while with our agents once or twice a year is time well spent! financial stability and enron i now turn to my final subject tonight - that of the bank's role in ensuring financial stability. responsibility for the day - to - day supervision of banks passed from the bank of england to the financial services authority in 1997. but as the central bank we still have a key role in overseeing the stability of the system as a whole. in this guise we meet on a monthly basis with hm treasury and the fsa in the so - called tripartite standing committee, to review the risks facing the uk financial system and take stock of any actions which may be required to address them. keeping close to the fsa is particularly important. to this end, i sit on the fsa board, and howard davies is a member of

into the global economy and financial system. their impact on the world economy already seems substantially greater than their shares of global gdp. this process of integration has a long way to go. it offers tremendous potential gains in income growth, not just for their 2. 5 billion citizens, but also for those who trade with them, through lower prices and further impetus to productivity gains. but it also brings greater adjustment pressures for producers of tradable goods and services, generating greater demands on political leaders to provide protection against those competitive pressures. this dynamic will test the ability of governments to sustain commitment to an open multilateral trading system, and the manner in which this plays out will have an important impact on future productivity gains. a fourth challenge involves prospective changes in the global exchange rate regime. the international monetary system now incorporates an uncomfortable disparity in the extent to which real effective exchange rates vary across regions. the monetary authorities of the united states and europe allow considerable variability in their real exchange rates, though they are not indifferent to movements in exchange rates. japan has somewhat less enthusiasm for flexibility and runs a regime in which it seeks to avoid large swings in the value of their currency. emerging market economies run a mix of regimes from those that permit significant flexibility to those that run essentially fixed pegs or regimes that seek to contain variations to relatively small degrees around implicit targets for their currencies against the dollar or a basket of the currencies of their major trading partners. the world has lived with this system for some time. but this is not an ideal mix, either for the monetary system as a whole, or for those countries which permit very little variability in their real effective exchange rates, and it ’ s probably not sustainable over time. it also is not ideal because it limits the extent to which markets work to facilitate adjustment. it creates the risk of larger moves in the major currencies than might otherwise be the case. in the national economies of those not yet prepared to allow more flexibility in their effective exchange rates, it creates the risk of growing distortions in the allocation of resources, conflict with domestic monetary policy objectives, and the risk of larger and more abrupt future movements in the exchange rate. these four broad forces will have substantial implications for the macroeconomic performance of the world economy over the medium term. this combination of fiscal sustainability problems, large external imbalances, and the tension in the existing exchange rate system creates the risk of unanticipated shocks to financial prices, even in a