##al monetary policy are, first, waiting too long to tighten and then not tightening aggressively enough in the initial stages ; and, second, eventually overdoing tightening as a result of the lags in monetary policy. when monetary policy moves to tighten, the effects are initially, because of lags, small and hard to detect. so the temptation is to continue to tighten until the economy does slow. by this time the delayed effects of past tightening are building and threaten a sharper than desired slowdown. in late 1995 and early 1996, monetary policy reversed a small measure of the tightening over the previous year, preventing the sharp rise in interest rates over 1994 from producing a more persistent period of below - trend growth or even a recession. the fourth challenge, which we continue to face, is to preserve the expansion without allowing an acceleration in inflation. this challenge is heightened by uncertainty about the level of nairu and about the permanence of an apparent recent decline in nairu. because of the lags, it is widely appreciated that it is desirable for monetary policy to be forward looking. but forward looking policy is predicated on confidence in a model that can predict how current and prospective economic conditions will affect inflation going forward. uncertainty about nairu has, in my view, made monetary policy more cautious in responding to forecasts of inflation that depend on the relationship between the current unemployment rate and some estimate of nairu. at the prevailing unemployment rate, the challenge is to be especially watchful for early signs of mounting price pressures and, if necessary, to be at least swiftly reactive to limit and then reverse any acceleration of inflation that might occur. if the unemployment rate declines, however, a more forward - looking approach may quickly become appropriate. the fifth challenge is to embed what has, to date, clearly been excellent short - run adjustments of policy to sustain the expansion and prevent an acceleration of inflation in an overall approach that will achieve the federal reserve ’ s long - run objective of price stability. achieving price stability is in our legislative mandate because it is the contribution we can make over the long run to enhancing economic efficiency and setting the foundation for sustainable growth. perhaps, this would be a good place for me to stop and you to register your opinions on some of the issues i have covered here.

means branch offices of a financial institution in different locations must establish corresponding business departments as contact points to interface with relevant departments at the head office. by doing so, information could be collected and centralized to the highest authority that could in turn decompose the centrally made plans level by level to different regions and localities for implementation. with the socialist market economy preliminarily established and improved in china, the outdated organizational structure of the people ’ s bank of china no longer fits in with its mandate to improve market operation and financial services. likewise, large financial institutions in china also face such an organizational problem. second, the development of technologies and transportation facilities is producing a profound impact on the economy and the financial industry. in the past, the underdeveloped telecommunication and computer technology as well as backward transportation tended to restrict the economic activities and trade to localities with little cross - region business interactions. while now, the development of scientific technology and transportation has facilitated cross - region and even cross - country commercial activities, increased the economic scales of financial markets and financial services and fostered the modernization of financial infrastructures. this development has brought about dramatic changes to financial business mode and created great challenges to the regionalized structure of institutions and organizations. under such circumstances, financial organizations more and more prone to set their views on the whole country rather on different regions and financial information and professionals also increasingly flow to financial centers providing services to the whole country. this in turn could help to facilitate the development of infrastructures of the financial centers and the cultivations of high - end technologies and financial products. finally, in today ’ s world, a country ’ s competitiveness depends on whether it has a dynamic financial center. a financial center has cluster effect, i. e., it attracts and fosters financial institutions, skilled labor force and various services, including intermediate institutions, such as legal, accounting, rating and appraisal services. naturally, some activities can and will be out - sourced, but the rest is fostered based on the clustering of financial institutions and skilled labor force. in this regard, the existence of a financial center is the yardstick of whether a country is internationally competitive and whether the efficiency of domestic financial services can be elevated by large scales. general secretary hu jintao called for continued efforts to make shanghai four centers of the nation, and most importantly a financial center. in this sense, to build a national financial center is not based on the interest of a city or a particular region. given