Rare events, even when dramatic at the time, lose their power to shape policy as memory recedes. The role of institutions is to retain a collective memory and to resist the temptations of the present. That is one of the most important roles of a central bank. It is accepted as such in the domain of monetary policy. And there is an equivalent role in financial stability. The introduction of simple and robust policy tools into a regulatory regime based on the exercise of constrained discretion would make it easier to resist overly rapid expansion of financial institutions. In particular, the authorities should maintain a clear focus on the issues that matter when the worst occurs – liquidity and leverage. It should be intrusive, in the sense of knowing what is going on, but not bureaucratic. A system in which it is easier for a large bank to expand and then destroy its balance sheet than for an individual to open a bank account has lost focus. That is not the fault of regulators, but a reflection of the pressures and incentives they have faced – from all of us. As a Kennedy Scholar at Harvard, I have always treasured Harold Macmillan’s words in his tribute to John F Kennedy. He was, said Macmillan, a man “whose eyes were on the horizon but whose feet were on the ground".
A shift in labor force from agricultural to non-agricultural sectors has been experienced in many developing countries. Rapid productivity gains observed throughout the post-war period, have been slowed in the last decade. Moreover, the recent drought that hit most parts of the world created a supply crisis, aggravating the upward trend in food prices. On the demand side the huge jump in energy prices and rising environmental and political concerns force developed countries to seek alternative energy sources. The production and  BIS Review 109/2008  1  consumption of bio-fuels increased rapidly, particularly after the European Parliament adopted the Common Agricultural Policy reform in 2003 and the US Senate approved the Energy Policy Act of 2005. As a result, prices for commonly used bio-fuel crops, such as corn, wheat, sugar cane and canola, started to climb. During the 2004-2005 period, only 7 percent of total corn production was used to produce bio-fuel, but this share is expected to increase to 17 in 2008 and 31 percent in and 2011. The increase in purchasing power of households in fast growing and emerging economies with large populations also put strong demand pressure on international food prices. What is the contribution of these factors in food price inflation, especially exogenous ones such as the adverse weather conditions? What is the extent of the role played by factors? Is it possible to control domestic food prices through monetary policies?