The Riksbank therefore assessed it was necessary to conduct a very expansionary policy to safeguard confidence in the inflation target. Good reasons to preserve confidence in the inflation target There are good reasons for safeguarding this confidence. When economic agents have a collective picture of how prices will develop in the future, it becomes easier to plan for the long term. The inflation target contributes to coordinating expectations in the economy and thereby lays the foundations for smoothly-functioning price-setting and wage formation. As I see it, the good wage formation system that we have today is perhaps the greatest achievement of inflation targeting. During the 1970s and 1980s, wage formation was a constant source of disruption in the Swedish economy. It caused considerable uncertainty for many companies. One was forced to manage the cost problem and poorer competitiveness through recurring devaluations of the krona. The situation was generally untenable and eventually led to an extensive economic crisis at the beginning of the 1990s. An important insight here is that a credible inflation target can give rise to a beneficial self-reinforcing cycle. If expectations are in line with the inflation target, and if pricesetting and wage formation adapt to these expectations, actual price developments will then also become consistent with the inflation target. On the other hand, if expectations were to become stuck at a level that is too low, one instead has a negative self-reinforcing effect, which means that the central bank has to struggle much harder to attain the inflation target.

With trust, we can have complex and farflung relationships and conduct such transactions in full confidence that these would be honoured and all liabilities or debts will be met. Without such trust, we need legal contracts and enforcement. We need money that provides finality to a transaction so parties can walk away afterwards. Unsurprisingly, money and even barter are mechanisms that allow us to do away with the need to trust. Though this can be expedient, it is not without a loss. What could have been an ongoing mutually beneficial business relationship is instead a series of individual and potentially costly transactions. Which is better? In a world without trust, we need the mechanisms to cope. In Islamic finance, with ethics as its core, such trust can be nurtured and sustained. We can thus rely less on the coping mechanisms which would merely serve as safeguards while focusing more on the business and activities that generate productive and impactful outcomes. Acting ethically should also involve embracing professionalism. Having qualified Islamic finance professionals will be a key differentiator. Professional credentials can be instrumental in strengthening the trust between financiers and customers. These qualities will anchor businesses and financial institutions towards sound and fair practices even in an environment that is rapidly changing and uncertain. In addition, continuing professional development, or CPD, will be crucial to ensure talents keep their knowledge and skills fresh, enabling them to respond to changing circumstances with agility and precision.