12 months to december. short - term interest rates - which went up to 12 % ( and tentatively even to 15 % ) before we left the erm in 1992 have been stable at 6 % for the best part of a year. helped by a decline in inflationary expectations, uk 10 year government bond yields have fallen to around 4¾ % which, apart from a brief period at the beginning of 1999, is the lowest they ’ ve been for nearly 40 years. they are now just about as low as in any major industrial country with the exception of japan. at the same time our economy has now grown continuously quarter by quarter for over 8½ years at an average annual rate of 3 %, which is well above most estimates – at least until recently – of a longer term trend rate of 2¼ - 2½ %. and the number of people in work has recently been at an all - time high in the uk as a whole, and close to its high point in your own region ; while the rate of unemployment, on a claimant count basis, is at a 25 year low in the uk as a whole and at its lowest for 20 years in yorkshire and humberside. the question now of course is – can we keep it up? the answer to that question depends on developments both at home and abroad, but let me comment first on the international situation which is currently the focus of a great deal of attention. as i explained in a speech last night in edinburgh, the bounce back from the world economic slowdown in 1998 / 1999 was such that in the year just ended world economic activity grew at a rate of some 4½ % which equals the fastest rate for 16 years – and compares with an average rate of some 3¼ % over the last 10 or 20 years. in large part this recovery was underpinned by unusually strong growth in the us, averaging some 4½ % over the past 4 years and surging to a peak of some 5½ % at an annual rate in the first half of last year – compared with an average rate of 2¾ % over the preceding decade. this remarkable strength of the us economy was possible, without overheating, against the background of unusually rapid productivity growth as investment in it spread through the us economy improving its supply - side capacity. these developments together implied higher corporate earnings growth in the us pushing up the stock market and at the same time attracting massive direct and portfolio capital inflows into the us – substantially from the euro

have a negative impact on americans ’ pension and 401 ( k ) holdings. this tightening of financial conditions would damage the u. s. recovery and result in slower output growth and less job creation. at a time that u. s. unemployment is very high, this is a particularly unacceptable outcome. in the extreme, u. s. financial markets could become so impaired that this would dry up the flow of credit to households and businesses. iii. u. s. dollar swaps in terms of what actions the official sector in the united states has taken or could take with regard to europe, i wish to emphasize that any and all such actions pursued by the federal reserve are motivated by the mandates congress has given to the federal reserve to promote price stability and maximum sustainable employment here in the united states. when the federal reserve system was created by congress in 1913, it was given the responsibility of providing liquidity to the financial system in times of stress in order to shield the economy, to the extent possible, from the severe effects of financial instability on economic activity and jobs. while the economy and the markets have evolved substantially in the century since then, this basic principle continues to guide our efforts today. central banks around the world have an important lender of last resort role. this role is important in order to protect the economy against financial instability. in today ’ s globally integrated economy, banks headquartered outside of the u. s. play an important role in providing credit and other financial services in the u. s. – providing a total of about $ 900 billion in overall financing within the u. s. for these banks to provide u. s. dollar loans, they have to maintain access to u. s. dollar funding. at a time when it is already hard enough for american families and firms to get the credit they need, we have a strong interest in making sure that these banks can continue to be active in the u. s. dollar markets. banks headquartered outside the u. s., like banks that are headquartered here, make extensive use of dollars in their financing activities. in part, this is due to the fact that the u. s. dollar is the world ’ s number one currency – a status that brings with it many benefits for our country. it is in the u. s. national interest to make sure that non - u. s. banks that are judged to be sound by their central bank are able to access the u. s. dollar funding they need in order to