Globalization also should make us change the way we interpret some of the indicators that have traditionally played such an important role in monetary policy deliberations. Globalization indeed warrants the examination of a broader array of data in arriving at monetary policy decisions. For example, understanding global capacity utilization in an industry may be more useful than equivalent measures of domestic capacity.

There's no perfect forecaster, no perfect indicator of inflation...Exchange rates reflect inflation pressures. They may also reflect the balance of trade and other factors. So there's no single optimal indicator of inflation. My personal strategy, therefore, is to be very eclectic and to look at a wide range of indicators. And among those is commodities, gold, exchange rates, the whole list. I think interest rates, real- side indicators, surveys, expectations, there's a whole list of variables which can be useful in forecasting inflation. And I think one has to be very open minded about using whatever information one has.

Where is inflation likely to go over the foreseeable future? Medium-term inflation forecasting is highly contentious--not least because the underlying theory of the determination of inflation continues to divide macroeconomic schools of thought--and I cannot begin to do justice to the topic in a short talk. The Board staff, for example, uses an eclectic approach that includes a number of components, including data analysis, statistical techniques, a suite of econometric models, and judgment.