Britain's framework for tackling economic and financial stability will have to change to meet the challenges posed by globalisation, Chancellor Alistair Darling will say this week.

The Chancellor will use his first Mansion House speech to City of London financiers on Wednesday to say that while the current tripartite framework is essentially sound, there are ways in which it can be improved.

He wants to strengthen the Bank of England's role in promoting financial stability by bringing in greater expertise and reforming the central bank's governance structure, according to Treasury officials accompanying him on his return from a Group of Eight finance ministers' meeting in Osaka, Japan.

He also wants to give the financial regulator more powers to help reduce the likelihood of a bank or other financial institutions running into trouble and wants greater international cooperation between regulators.

Authorities should also stand ready to introduce new policy tools like the Bank's Special Liquidity Scheme launched in April where necessary to ease market tensions.

Darling will say Britain's economic policy set-up is facing its toughest test since the Labour government came to power in 1997 because of the credit crunch and soaring commodity prices.

"We are exposed to global events like never before, as the past 12 months have shown," Darling will say in his speech. "So while we must position ourselves to reap the rewards of globalisation, we must also recognise the realities of this new interdependence."

The Treasury has been preparing for inflation to exceed 3 percent when figures are released on Tuesday, which would trigger Governor Mervyn King to write an open letter to the government explaining how he plans to bring it down, as required by the Bank's remit.

Soaring oil and food prices are the main reasons for the expected rise in inflation, reducing policymakers' leeway to cut interest rates at a time when the economy is slowing sharply because of a global tightening of credit.

Darling used the weekend meeting of G8 finance ministers in Osaka to call for coordinated international action to bring oil prices down and combat food price inflation.

The global economy and high oil prices will be high on the agenda when U.S. President George W. Bush meets Prime Minister Gordon Brown on Monday morning, according to a Downing Street spokeswoman.

Brown will also ask Bush what can be done to push ahead on reaching a global trade deal before U.S. presidential elections in November.