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

you can – but preferably not until i ’ ve finished speaking to you! for my purpose tonight is to explain what it is that the bank through the mpc is trying to do in its conduct of monetary policy, to say something about where we are and to explain some of the risks and uncertainties that we are facing as we look forward. what then are we trying to do? the mpc ’ s mandate from the government is to maintain price stability ( currently defined as an inflation rate of 2½ % - on a specific measure of retail price inflation ) and subject to that to support the government ’ s economic policies, including its objectives for growth and employment. now no - one can reasonably suppose that inflation could be held precisely at 2½ % consistently over time. but we are consistently to aim at that target. now what that involves essentially is trying to keep aggregate nominal demand in the economy more or less continuously in line with the overall supply - side capacity of the economy – as a whole – to meet that demand. in fact, although our objective is defined narrowly in terms of price stability – the 2½ % target – we can only hope to achieve it by maintaining stability in a much broader sense – that is by consistently maintaining a balance between overall demand and supply. that, essentially, is how best we can contribute to the government ’ s objectives for growth and employment. it is in fact a necessary condition for maintaining the steady economic progress that we have seen in recent years. there is not a great deal that we can do – through monetary policy – directly to affect the supply - side of the economy, the underlying rate of growth that we can hope to sustain. maintaining a stable monetary environment can certainly help, but that is essentially determined by the ingenuity and skills of our business managers and our workforce, by the whole range of government policies and importantly too, mr chairman, by the imagination, energy and enthusiasm of organisations like your own yorkshire forward in developing and putting into effect your regional economic strategy. our job – as i say – is to keep overall demand in the economy growing broadly in line with supply - side capacity. so how then are we doing? first on inflation. since we came out of the last recession, in 1992, retail price inflation ( on the government ’ s target measure ) has averaged 2. 7 % ; it has in fact been marginally below the 2½ % target for much of the past two years and was 2. 0 % in the latest