In many countries, the key to this success has been inflation targeting. Although the main reason for introducing inflation targeting in many cases - not least Sweden’s - has been frustration over the previous regime and economic performance, it has subsequently proved to work so well that it now stands out as an interesting option also for already well-functioning economies. This is demonstrated in particular by the current debate regarding a possible introduction of inflation targeting in the United States, where the economic performance in recent decades has been remarkably good and monetary policy successful. But first, before I go into a problem that currently feels significant for us at the Riksbank and that I also think is central to the discussion in the United States and elsewhere - the balance between concerns for output stability and inflation stability - allow me to say a few words about my fundamental views regarding inflation targeting policies. Unsurprisingly, I see considerable advantages of having an explicit, symmetric inflation target. It is also my impression that this view enjoys considerable support in the academic literature, an assertion, however, that no assembly is better placed to question than this one. The clear framework encompassing an inflation target, published forecasts and a specified target horizon has generally worked well as a guide for policy. There have been communication problems here and there, but it is not obvious that the situation would have been much better under a different regime.

One issue is the increasing integration of banking, securities and insurance services; a second is the increasing pace at which capital moves across international borders; a third, the Year 2000 problem; and a fourth, the challenge of bringing improved risk management techniques to business operations as a whole, including the trading rooms. This is particularly important for participants in the rapidly changing fixedincome markets. First, the integration of previously separate financial services means that institutions must be prepared to manage risks across a far wider range of products, business units, and counterparties than they have been accustomed to doing. In the securities lending markets, for example, an increasing number of firms are accepting equities as collateral for financing arrangements, or structuring securities lending transactions off-balance-sheet through total return swaps and other derivative structures. Thus, corporate treasurers must develop greater expertise in equity and derivatives markets. More broadly, the potential economies of scale and scope, as well as the potential benefits of reducing risk through sectoral and geographic diversification, have fueled the trend towards consolidation in varied financial industry sectors. As this trend continues, we must meet the challenge of merging the risk management practices of previously separate financial firms. These readjustments are likely to be far more complex for firms consolidating across the spectrum of financial service providers. A second issue that has an important bearing on risk management techniques is the increasing pace at which capital moves across international borders.