important to add that price stability according to our definition is to be maintained over the medium - term. the medium - term orientation of our monetary policy strategy and our aversion to fine - tuning of short - term developments in prices and real variables has helped to provide a firm compass while the economy was sailing through the uncharted turbulent waters of 1999 and subsequent years. it deflected the risk that, amidst exceptional uncertainties, the central bank may itself become an additional source of noise. ultimately, it provided a degree of leverage over expectations on the eve of the transition to the new currency that could pin them down solidly to the intended objectives of policy. the mandate and the independence that it ensures endowed the new institution with a stock of credibility that facilitated its operations and its interactions with the markets from the first day of monetary union. secondly, our strategy has helped to sort through a wealth of conflicting statistics and has provided a reliable roadmap and a sense of direction. we have built into our strategy two complementary perspectives over the workings of the economy, one in which money and credit are attributed a key role in the formation of prices. and one in which real variables receive pre - eminent attention as the determinants of price pressures in the short term, and where monetary factors are treated only implicitly. under what we call the first pillar, we thoroughly monitor monetary and credit indicators on the basis of those analytical frameworks which can sensibly incorporate developments in money. under this pillar, we announce a reference value for m3 growth which, if realised on average over the medium term, should in normal circumstances indicate that policy is consistent with the achievement of price stability. i shall return to this principle shortly, as it will constitute the focal point of my remaining observations. under the second pillar we review a broad set of non - monetary indicators and assess their implications for price setting over a short to medium - term horizon. these two mutually - reinforcing perspectives provide robust indications for a policy aimed at price stability, which survive the cross - checking of competing models and the rise - and - fall cycles of fashions in economic thinking. keeping a firm sense of direction but how can a monetary policy framework induce prompt action in the face of ever changing circumstances, and at the same time maintain a firm sense of direction? here there is clearly potential for destabilising mechanisms setting in. constantly bombarded by economic news, a central bank risks becoming hypnotised by the latest indicator, by

mitigate and even neutralize interest rate risks. in many economies around the world, there are two common types of financial products based on benchmark interest rates : ( 1 ) deposits, loans, and mobile nominal interest bonds to various periods ; and ( 2 ) interest rate derivatives. in israel, unlike many other advanced economies, activity is currently conducted mainly in the assets themselves, and not through derivatives. it is important to note that even though activity in interest rate derivatives has grown significantly in recent years, it is still quite low compared to other countries, mainly in the longer terms. these differences indicate the underuse of financial defenses against interest rate risks in israel, relative to what is common in other advanced economies. in order to illustrate how the development of this type of instrument would help the broad public, we can use the example of the early payment fee that is well - known to the representatives of the banking system who are here, and that is relevant to almost anyone who takes out a mortgage in israel. it is reasonable to assume that if the banks were able to hedge the risk of early repayment of such a long - term loan and better manage their risk balance, this fee would be reduced. the banks would be able to do this by adopting a long - term irs instrument, which replaces cash flow from fixed interest with variable interest. as a result, the customer would have a greater ability to refinance a mortgage in view of various developments — whether they are specific to that customer or they apply to the entire economy — and would improve his financial state, or what we economists refer to as “ consumer well - being ". in contrast with most advanced economies, where a significant proportion of interest rate derivative transactions are settled through a central clearinghouse, such infrastructure still does not exist in israel. in a central clearinghouse, the risks of various transactions offset each other, and the remainder is transferred to one central entity that manages it through the appropriate collaterals. in order to develop the interest rate derivatives market in israel, it is important to advance a central clearinghouse that will significantly mitigate the credit risks inherent in such transactions. there are other advisable measures that it is worth thinking about, which i will discuss at other occasions. to conclude, the israeli economy has made many steps in recent years to advance competition in the credit market. there are additional possible stems that would complete what is necessary to advance competition in this market, some of which — particularly those that deal with the structure of