all this gives monetary policy watchers - in financial markets and in the country at large - plenty of information by which to judge how we are doing, as well as to form their own expectations of future inflation and growth. how successful have we been in establishing a credible policy regime? a key test is what people expect about inflation, and in particular how those expectations react to unexpected economic news. if the regime is credible, people should expect inflation to stay close to target. and any shocks that affect inflation in the near - term should have no impact on inflation expectations further out, because people believe we will take whatever action is needed to return inflation to target. and by this measure, the current policy framework seems to be highly credible. there are those who claim that the mpc has never really been tested. in fact, the uk economy has been hit by a number of quite severe shocks over the past five or six years. international financial markets were convulsed by the asian financial crisis in 1997, the russian debt default and ltcm crisis in 1998, the 9 / 11 terrorist attacks, the enron and worldcom scandals in 2001 / 2 which dented confidence in corporate governance. around the same time, we also saw the bursting of the dot. com bubble and a slowdown in world activity. in the past decades, shocks like this would almost certainly have destabilised uk economic activity and inflation. that, after all, is what happened in the 1970s, when the price of oil quadrupled, and then again in 1979 when it more than doubled. since the late 90s however, medium - term inflation expectations - both as measured by surveys and as implied by financial asset prices - have barely budged. even this year, when oil prices rose by over 70 % to their peak in late october before falling back, and other producer input prices, including metals, have surged ahead, both surveys and financial asset prices show inflation expectations fluctuating around the mpcs inflation target, within a very narrow range. this remarkable de - coupling of inflation expectations from economic disturbances is the single most encouraging indicator that the new monetary policy framework is doing its bit to ensure continued economic stability. the importance of reliable information in monetary policy as in business, reputations that have taken decades to build can be lost with distressing speed : it only takes one banana skin to turn a confident stroll into a painful tumble. and while monetary policy may be a matter for experts these days, it is very far

currently indicate. we talk to people a third way of reducing the risk of error is to talk to people on the ground. if the hard data are at odds with what they are telling us, that will give us pause for thought - about the likely economic outlook, or at least the risks around our central view. back in the early 90s a familiar charge against the treasury ( which at that time had primary responsibility for setting interest rates ) was that they were out of touch - stuck in london, they missed early signs of the recession. the bank has been careful to avoid this trap. it has built up a network of agencies to act as its eyes and ears around the country. that regional network has grown out of the bank ’ s branches that were established in 1826 to deal with problems caused by the failure of local banknote - issuing banks. ( the nearest branch to north wales would have been in liverpool, and like several of the sixteen branches which the bank opened at that time it was located on land previously occupied by licensed premises - the old queen ’ s arms in castle street. indeed the guiding principle seems to have been “ if it works as a pub it will work as a bank ”. the licensed victuallers association has taken its revenge in recent decades, as old banks have been turned into pubs ). within the branches, the bank appointed an agent to liaise with local industry and commerce, and since 1930 they have been sending regular reports on their economies to threadneedle street. during the 1980s and 1990s, most of the branches were closed as different schemes for guaranteeing the supply of bank notes were established. but the agents remained, and the network was extended to its current line - up of twelve - including a new welsh agency located in cardiff, now run by adrian piper. between them, the agents are in regular contact with some 8000 firms. this provides the basis for the agents ’ monthly reports and presentations to the mpc ; the committee also commissions special surveys and asks for agents ’ help in understanding puzzles in the data. this information is currently published in summary form each quarter, alongside the inflation report. we are now looking at ways of making it available on a monthly basis, alongside the minutes of the mpc meeting. mpc members regularly take their own eyes and ears on visits to individual businesses, making around 60 visits to the regions a year. as well as acting as a reality check on economic statistics, talking to businesses around the country improves our understanding of