go on rising at this rate because they would then exceed the room that now looks like being provided by the probable trend for productivity growth. one illustration of this is that in the coming one to two years, underlying domestic inflation will be somewhat above 2 %, though this is countered by downward effects from import prices. in our main scenario we judge that overall inflation prospects are in line with the target one to two years ahead but that und1x inflation will be marginally above the target at the end of the period. with an unchanged repo rate, und1x inflation is expected to be 1. 6 % one year ahead and 2. 1 % after two years. diagram 3. und1x forecast with uncertainty intervals 3. und1x with uncertainty intervals percentage 12 - month change sources : statistics sweden and the riksbank the transitory factors that the riksbank should disregard in the formation of monetary policy are judged to be small in the coming one to two years. moreover, the riksbank considers that the risk spectrum for inflation is balanced. in other words, the risks of inflation being higher and lower, respectively, than in the main scenario are equal. on the one hand, inflation could be lower than in our main scenario if there is a marked correction to american stock markets or if deregulations and trade liberalisation have greater effects than we have allowed for. on the other hand, inflation could be higher if oil prices do not fall at the rate we assume or if the growth of demand, instead of slackening at the end of the forecast period as we foresee, remains strong. the strong economic activity and gradually growing inflationary pressure point to a future need for a further repo rate increase. the timing and size of the increase are considered in the light of, for example, new information and its significance for the riksbank ’ s overall inflation assessment. our current assessment is that in the greater part of the coming one to two years, inflation is expected to be below 2 %. this speaks in favour of leaving the repo rate unchanged for now.

randall s kroszner : the importance of fundamentals in risk management speech by mr randall s kroszner, member of the board of governors of the us federal reserve system, at the american bankers association spring summit meeting, washington dc, 11 march 2008. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * it is a pleasure to be addressing the new american bankers association, which has arisen from the successful merger of america's community bankers and the aba. your association truly represents the full range of banks in the united states. the focus of my remarks today – the importance of fundamentals in risk management – should still resonate with all of you, whether you are part of a large global bank or a smaller community bank. unfortunately, recent market events have shown us that banking institutions still face some risk management challenges, including a need to refocus on some key fundamentals. the good news, however, is that we also have many examples of sound risk management practices during the recent disruptions. risk management challenges getting the fundamentals right – and being ever vigilant about their consistent application and execution – forms the basis of any sound risk management system. i am not trying to imply that implementing risk management fundamentals is easy ; that is, just because something is fundamental does not mean that it comes naturally. in fact, there are a number of risk management challenges inherent in banking that require careful identification and attention. one of the most basic risk management challenges relates to concentration of risks. from the beginnings of banking, bankers always have had to be cautious to guard against, as the old adage says, " putting all their eggs in one basket. " for example, renaissance bankers learned the lesson – some of them the hard way – that they did better by lending not just to a few merchants active in one trade, but to a range of merchants active in a variety of trades. as risk management techniques grew over the centuries, bankers became more adept at identifying, measuring, and managing risk concentrations, but that does not mean the original problem presented by concentrations – that losses could occur all at the same time – has vanished. indeed, some bankers occasionally forget that this challenge still exists, usually with unfavorable consequences. it is also important to note that concentrations in banking include not just basic lending, but also holding securities, trading complex instruments, providing liquidity facilities, engaging