However, we should focus our resources first on activities where we have a natural advantage, or can build up a capability. We must push in the same direction as market forces, and not against them. Our main approach to developing the financial centre should therefore be to establish a level playing field with transparent rules and the right environment, so that market forces can operate and innovation can flourish. Active promotion of specific activities complements this. Conclusion The major changes in the financial industry compel financial centres to adapt and evolve, or else be bypassed and rendered irrelevant. Singapore aspires to be one of the financial centres in Asia, and a node in the global network of financial markets. By implementing the right policies and strategies vigorously, we hope to develop and grow as a financial centre, serving Asia and contributing to its development and prosperity. 4  BIS Review 50/2001
I will return to the monetary policy implications of this growth outlook in a while. The missing instrument problem But before doing so, I want to report on the progress that has been made in strengthening the macroeconomic policy framework in the UK in response to some of the fault lines exposed by the financial crisis. Much analysis and soul searching has been conducted in the aftermath of the crisis, and the lessons and implications for different aspects of economic, financial and other areas of public policy are wide ranging. In terms of the lessons to be learnt for monetary policy, many commentators and policymakers – myself included – told a variant of what could be termed the missing instrument problem. 3 This analysis argues that the case for an inflation targeting framework remains sound: the focus on a clear numerical target for monetary policy has served our  3  4  Dale (2009). BIS Review 161/2010  economy well, and low and stable inflation remains a cornerstone of our long-term prosperity. However, it acknowledges that control of short-term interest rates – the main tool of monetary policy – is a relatively blunt instrument best deployed maintaining a broad balance between nominal demand and supply. In particular, movements in short-term interest rates are not well suited to managing risks from credit cycles and other imbalances within the financial sector.