So we are again impaled on the horns of our earlier dilemma, arising from continuing imbalance between the stronger domestic and weaker externally-exposed sectors of the economy. Believe me – it is not a comfortable place to be. The question is what to do? Of course, as with everything else, where you stand depends on where you sit. The suffering sectors – most of agriculture, large parts of manufacturing industry and some services sectors – are in no doubt. Cut interest rates again – they say – and again and again. They’re still twice as high as interest rates in Europe – and they might just as well add, they are over 150 times as high as interest rates in Japan! The many more net savers – including pensioners living off the interest on their savings – take the opposite view, although they do, of course, benefit from the low inflation environment through the protection it gives to the real value of their assets. What we have to try to do is to maintain stability in the economy as a whole, by keeping overall demand continuously broadly in line with the supply-side capacity of the economy as a whole. The  BIS Review 68/1999  2  inflation target is not some abstract end in itself – it is the measure, or barometer if you like, of how successfully we are managing to maintain macro-economic stability in the economy as a whole in this much wider sense.
Following the implementation of inflation targeting, the report will be published quarterly; - a model calibrated by the Bank’s staff is currently being tested and will be used for forecasting purposes. Instead of going into the details related to the Inflation Targeting framework, I will let my fellow speakers tackle the most important issues. Shortly after this, Deputy Governor Ms. Rachel Lomax will present a compelling account of UK’s experience and, may I add, success as a benchmark inflation targeter. After the lunch break, Gill Hammond, Deputy Director of CCBS, will give you an excellent presentation dealing with specific issues and challenges faced by emerging market economies when adopting inflation targeting. Later on, we will have our guests from the Czech National Bank and the National Bank of Hungary giving you a purposeful insight of such challenges and of their countries’ experiences with the IT framework. Mr. Ludek Niedermayer, Deputy Governor of the Czech National Bank, will first explain to you “why and how” inflation targeting was adopted in the Czech Republic – the first country to embrace this regime in our region. Then, it will be for Ms Csermely Agnes, Director with the National Bank of Hungary, to share with us the “Lessons and Challenges” put forth by the Hungarian experience with inflation targeting.