6 Recently, given the expected benefits of achieving greater market efficiency in a single interest rate benchmark regime, as well as the good progress in developing SORA markets, the industry jointly recommended for Singapore’s interest rate markets to adopt a SORA-centered approach.6 In short, a transition from SOR and SIBOR towards SORA. 7 What does this mean for SGD financial markets? First, this shift is an opportunity for us to enhance the overall functionality and efficiency of SGD interest rate markets. For banks, compared to managing both SIBOR and SOR exposures, this approach will reduce basis risks between assets and liabilities based on two different benchmarks, and allow for greater pricing efficiencies. For borrowers, the averaging effect from compounded SORA will provide more stable rates, compared to single-day SOR readings, which is exposed to idiosyncratic market factors, such as quarter- or year-end volatility. By concentrating activities in a single SORA-centered interest rate benchmark, market efficiency will be enhanced. Second, the adoption of a SORA-centered approach is aligned with the direction in key financial centres. This will support the continued participation of global institutions and 2/7  BIS central bankers' speeches  investors in SGD markets. As our banks get ready for SORA adoption, this has synergies with their transition efforts to trade and risk-manage positions denominated in other major currencies, which are similarly shifting to risk-free interest rate benchmarks. 8 The recommendation to shift to a SORA-centred benchmark rate regime has been put out for public consultation.

With regard to the outlook for Sweden, the Riksbank foresees an average annual growth rate of almost 3 per cent in the coming years. Looking at inflation prospects, the rate of price increases is expected to rise in the period ahead as resource utilisation increases in Sweden and abroad. However, a continuation of relatively weak labour market conditions and a favourable cost situation mean that the rise in inflation is expected to be relatively moderate in Sweden. Our forecast in the Report is for a risk-adjusted inflation rate of 1.1 per cent one year ahead and 1.8 per cent two years ahead, measured as UND1X inflation. Swedish housing finance On 1 July this year the Act on issuing secured bonds (2003:1223) will come into force. One of the main incentives behind the new Act is to offer Swedish mortgage institutions the same favourable financing opportunities that these institutions face in European countries that have already introduced similar legislation. So will this new legislation result in a new financing structure for Swedish mortgage institutions and in large issue volumes in the international markets? This remains to be seen. The Riksbank has, for reasons of principle, been hesitant towards the introduction of the legislation on secured bonds, primarily because the supervisory task charged to Finansinspektionen (the Swedish Financial Supervisory Authority) could be perceived as an implied government guarantee, but also because the legislation in this field entails a return to regulation in the credit market, which in itself can be questioned.