For households with debts, the scope for consumption is also affected by interest rate adjustments if the share of income used for interest payment changes. Accordingly, we take this into consideration when we make our inflation assessment. There has been a swift increase in household debt and house prices over a long period. One potential cause of concern, which we cannot disregard, is that if this trend continues at the same rapid rate, a situation could develop where, at a later date, there is a risk of a considerable slowdown in growth and employment as a result of households finding themselves compelled to increase savings owing to a heavy debt burden. The risks involved here are very difficult to quantify in forecasts or pinpoint in time, but could none the less be a threat to macroeconomic stability. Inflation could then also revert to a state that might prove difficult to deal with. However, it should be underlined that the likelihood of such a scenario arising is regarded as slight, in particular when we have identified it in good time. We have taken these factors into consideration even if they have not been crucial for our monetary policy decisions. The Riksbank does not have a target for the krona exchange rate. However, since the exchange rate is one of many factors affecting growth and inflation, we must naturally take the path of the krona into consideration in the inflation assessment. The exchange rate affects inflation directly and generally relatively quickly through prices of imported goods and services.

In Malaysia, almost half of foreign direct investment into our country originate from the regional economies. In addition, Malaysian corporations have also in recent years increased substantially their presence in the region. The success of intra-regional investment reflects the competitiveness and dynamism of Asia. A more recent phenomenon is the increased financial integration. As this occurs, it will result in a more efficient recycling of Asian savings into investments within Asia. Given that Asia will need about USD8 trillion in infrastructure development over the next ten years, the effective channelling of Asia’s large pool of savings into productive uses within the region will be important to support growth and development in Asia. Deeper financial integration within Asia is already occurring as financial markets in Asia become more developed and mature. Regional efforts are being intensified to accelerate this process, including in developing the regional bond markets. Policymakers in Asia have also come together in ASEAN+3 and the Executive Meeting of East Asia Pacific (EMEAP) groupings to promote greater cooperation in maintaining regional macroeconomic and financial stability. The more volatile and unstable international financial and economic conditions have called for the need for greater regional surveillance for the early detection of risks to the region. These have now been put in place including mechanisms to enable the region to cope with rising uncertainties. Through EMEAP, regional collaboration on surveillance has been enhanced to strengthen the region’s vigilance and  2  BIS Review 43/2010  resilience against potential crises.