have seen in the quarter century since the mpc was created in 1997. that emphatically does not mean the regime has failed. far from it. the regime was set up for times exactly like these. the regime, founded on central bank independence, is now more important than ever. the worth of any regime is tested in the difficult, not the nice, times. to illustrate that, let me quote part of the then governor eddie george ’ s speech given at mansion house in 1997, a month after the mpc came into being : “ the technical implementation of monetary policy is not at all an exact science. it operates with long and unpredictable time lags so that we are necessarily continuously straining to peer into the future, relying substantially upon uncertain economic forecasts and carefully considered, but ultimately subjective judgements about the probabilities – and of risks – surrounding them. so i welcome the chancellor ’ s detailed reformulation of our marching orders, which acknowledges the volatility of the real world. ” wise words, which are more relevant than ever today. in the same spirit, i want to spend the rest of my time tonight setting out the judgements we are having to make now, in a real world which is certainly volatile. but i will start with one statement that doesn ’ t change whatever the circumstances : our job is to hit the inflation target, and in the current circumstances to return inflation to target, always remembering the importance of understanding time lags in policy, and lags in the impact of economic shocks. let me be quite clear, there are no ifs or buts in our commitment to the 2 % inflation target. that ’ s our job, and that ’ s what we will do. when it comes to judgements we have to make, it is important to understand the disturbances hitting the economy and their significance for monetary policy. we have seen an almost unprecedented series of such disturbances – unprecedented certainly in modern times. i am going to pick out four which have been at work in the last two and a half years and discuss them in broadly chronological order. i will start with the onset of covid over two years ago now and its subsequent waves. it is worth briefly recalling the precipitous drop in economic activity at that time, and the speculation that it would be the largest drop in three hundred years. in the end it was very big, but not quite that big. it required a very large response from macroeconomic policy. monetary and fiscal policy

##ssimistic about business opportunities in london if emu goes ahead with the uk a ‘ slow track ’ country. i regard this as a pessimistic assessment, and will attempt this morning to persuade you that you are wrong. my first point, and perhaps the strongest, is that uncertainty about uk participation in emu has persisted now for a considerable number of years - perhaps indeed since the late 1970s when the uk government ’ s response to the original emu plan was distinctly lukewarm. and certainly no british prime minister has given an enthusiastic endorsement of the most recent delors plan for emu, at any stage. yet at the same time, london has remained the dominant futures and options market in europe, and indeed it has strengthened its position in many markets during that time so that, as far as on - exchange business is concerned, london is by far the largest centre in europe and second only to chicago. and the central bank survey of otc derivatives markets in 1995 demonstrated london ’ s position as the premier centre for the trading and booking of otc derivatives with 27 per cent of average daily turnover, pushing new york into second place. i do not propose to follow the traditional gambit of ministerial speakers at trade conferences, reciting figures far better known to the audience than to the speaker, but the growth of liffe, the lme, the ipe and omlx in recent years has been striking, and the most recent development is that liffe overtook the chicago mercantile exchange to become the world ’ s second largest exchange in the first quarter of this year. so if, as i was taught at stanford business school, markets are efficient in the sense that they react in advance of events, in the light of an assessment of probabilities, then they appear not to have been particularly distressed by the prospect that emu may start without the uk in the first wave. certainly we have not seen an anticipatory flow of business away from london and towards continental european markets. we have recently asked ourselves why it is that liffe has retained its position in the three - month euromark contract and the ten - year bund contract - europe ’ s most active longer - term interest rate contract. and for those of you who like to go home with a reading list, there is an interesting article on the subject of what makes for successful futures contacts in our latest quarterly bulletin. ( i am sure the restaurants and the bars of the west end will be empty tonight as