the bank of a single forecasting function and cross - use of its outputs, helps to avoid that particular trap. any single central forecast would still most likely be wrong of course, but the committees will learn about changes to the outlook consistently, allowing consistent policy adjustments. another angle to cooperation arises from the “ long and variable lags ” in the economy – and not just in the monetary transmission process. each committee can face very long and uncertain lags between deciding to take a policy action and the maximal impact on its objective. that makes it unlikely that any one objective can be achieved precisely at all points in time. as well as predictable lags, policy outcomes are subject to all sorts of random disturbances that constantly require changes to policy settings. suppose, however, a committee actually tried to obtain its objectives at every moment in time regardless. that would likely necessitate wild swings in policy settings : imagine the mpc trying to set bank rate so that 2 % inflation was achieved exactly every month! not only would it quickly prove impossible, attempting the feat would drastically reduce the chances of the other committees achieving their objectives. so a degree of humility is required by each committee, for the sake of coordination as well as the credibility of each. in their commitments to hit their statutory primary objectives i would say that : • the mpc should not be “ inflation nutters ”. • the fpc should not seek the “ stability of the graveyard ”. • the pra board should not seek to implement a “ zero failure regime ”. that is supported helpfully by the secondary objectives of each policy maker. one can interpret them in several ways, but to me they help put the primary objectives in an overall context. we want all three objectives to be met in an economy which is growing at its maximum sustainable potential. excessive zeal in meeting any primary objective too quickly could act, not just to slow actual growth, but reduce sustainable potential and this is important to keep in mind. cooperation and coordination are generated in the framework by several structures. essentially, these are about information sharing. the most important is via cross - committee membership : the governor chairs all three committees, and there is further crossmembership of internal members. and there is also joint briefing meetings / staff support. the strategic plan of the bank announced earlier this year, is designed in part to enable the different policy functions of the bank to work more effectively together, reducing overlap and exploiting synergies. a notable example of policy

since changes in interest rates take a year or two to have their effect. the current rate of inflation says rather little about where inflation is likely to go. we need to judge, as best we can, the changing balance of supply and demand in the economy – inflationary pressure. but why has unemployment been rising? one possibility is that the labour market is still feeling the effects of the period of below - trend growth in late 2004 and 2005. we know that employers tended to hold on to people then rather than letting them go, probably because they expected – rightly as it turned out – that the slowdown would be shallow and short - lived. as demand picked up, they were able to work their existing staff harder again, rather than hiring new people straight away. but meanwhile the potential workforce – the number of people in work or who say they would like to work - has been growing at its fastest rate in twenty years. this reflects a number of developments. first, the influx of workers from abroad, including from the european union accession countries. the precise figures are very uncertain, not least because people come and go a lot, but recent research 4 estimates that 2005 probably saw the largest ever entry of foreign workers to the uk, totalling around 400, 000 – equivalent to around 1. 5 % of total employment ( although outflows have probably risen, too ). in addition, older workers are increasingly likely to stay in work – people above pensionable age accounted for a quarter of the growth in the work force over the past year ; and government policies are encouraging people on benefit back into work. the result has been that the labour force participation rate, the number of people in work and the number who are unemployed have all been rising at the same time – a fairly unusual combination. a faster growing labour force potentially raises the amount the economy can produce. rather like raising the economy ’ s speed limit, it implies that it can grow faster without hitting supply constraints and generating inflationary pressure. that may be the situation right now. in any event, putting all this together with the impact of energy - related price movements, i do not read the fact that inflation is currently above target as convincing evidence that the economy is overheating. “ foreign labour in the united kingdom : current patterns and trends ”, john salt and jane millar, labour market trends, office for national statistics, october 2006. while demand has not been growing unusually slowly over the past year, it is now two and