But ultimately, it is the repo rate’s effect on overall economic development and the prospects for inflation that are the decisive factor for monetary policy. I would also like to point out that household indebtedness in a broader perspective constitutes a vulnerability for the Swedish economy, as households with large debts are not just sensitive to higher rates but also to other types of changed economic circumstances, such as falling housing prices and weaker economic activity with higher unemployment. 15 A study by the IMF from 2017 with data up to 2012 indicates that saving among Swedish households is very unevenly distributed; for example, the 50 per cent of households with the lowest income do not save at all. See IMF (2017), “Sweden: Selected Issues”. 11 [13]  Several factors can affect our forecasts – no “auto-pilot” towards higher interest rates So far, I have talked about the Riksbank’s monetary policy in terms of our best assessment or main scenario. But, as the world-famous physicist and Nobel Laureate Niels Bohr is reported to have said: “Prediction is very difficult, especially if it’s about the future”. We have most certainly not switched on an “auto-pilot” towards higher interest rates. As always, we are prepared to reassess monetary policy if developments were to justify it. So, what factors could affect our forecasts and future monetary policy? We can divide them into four different categories: economic developments abroad, the domestic economy, the development of inflation and structural changes.

Call for responsive regulation My third point concerns the role of regulators and regulations. Markets are calling and indeed demanding for regulation to be more responsive to the needs of innovation and growth. If globalisation has changed the international outlook of markets, the blurring of sectoral boundaries has transformed financial markets from within. With the mergers and acquisitions of the 1990s in the financial industry, cross-selling has become prominent today with banks seeking to distribute investment and insurance products while stockbrokers offer cash management and checking accounts. Insurance corporations on their part  BIS Review 31/2002  3  have concentrated efforts to promote investment-linked policies. The trend is in part demand-driven with customers seeking a one-stop financial house that provides convenient and integrated approach to money management. Notwithstanding the global economic downturn which has checked M&A activities, market players have not let up efforts to gain a competitive edge by consolidating their positions through alliances. The regulatory response to this has been a trend towards more integrated supervision. This allows regulators to supervise the range of activities more efficiently by taking a holistic view of the financial services market. The UK FSA is one example of integrated supervision under one roof while Australia’s Securities and Investments Commission and the Australian Prudential Regulation Authority have ambits that cut across different industries. As product lines converge, regulators in setting the rules have to be careful not to inadvertently pick and choose the winning models.