But just as changing from Fahrenheit to Centigrade has not proved easy for those who had become used to the old measure, so it will take time for us all to adjust to the new inflation measure. Unfortunately, there is an additional complication. Unlike the translation between Fahrenheit and Centigrade, the difference between RPIX and CPI inflation does vary with the economic temperature. That is because the “formula” effect is not the only difference between the two measures. RPIX includes both house prices and Council Tax. Those items are omitted from the basket of goods and services used to construct the CPI. So when house prices are rising faster than prices in general, as has been the case in recent years, RPIX exceeds CPI inflation by more than the half a percentage point represented by the “formula” effect. Over the past 15 years, when data have been collected on both measures, RPIX has exceeded CPI inflation by about three quarters of a percentage point. It is possible to argue, therefore, that moving from a target of 2.5% for RPIX inflation to one of 2% for CPI inflation represents a small increase in the long-run effective target. But no reasonable person could describe a symmetric target of 2% as inconsistent with price stability, defined as a state of affairs in which inflation does not materially affect economic decisions by families and businesses.
Rich countries can and will adjust more smoothly to these challenges, but it will be the poor in the developing world who are going to have to bear the heaviest burden. Naturally, changes in energy production and consumption as well as in energy markets structure have a special contribution to global action for coping with climate change. Second, surging energy demand worldwide makes us see the issues of energy security from a new perspective. A frantic search for energy sources by Asia's emerging economies, and the increasing concentration of production in the hands of sometimes unpredictable regimes, has deep ramifications for energy security in the advanced world, including and most notably in the European Union. Here, a forceful united approach is called for, based on integrated and well-functioning markets and European solidarity. Third, high and volatile energy prices constitute a challenge for macroeconomic management. Energy price developments have pushed up inflation in the advanced world with adverse effect on private demand and growth. On the other hand, windfall due to high energy prices poses challenges to fiscal, monetary and exchange rate management in the countries exporting energy. I am happy that the excellent list of speakers allows us to touch upon all these key challenges today. Ladies and gentlemen, before giving the floor to Mr. David Kotok from the Global Interdependence Center, the co-organizer of today's event, I would like to speak briefly about our cooperation with the Global Interdependence Center.