with a successful consolidation of the government finances, have essentially succeeded in achieving what we had hoped for. sweden has gone from being a high - inflation economy, characterised by recurring cost crises and unstable economic developments, to being an economy with low, relatively stable rises in prices and wages, where the risk of periods of overheating and subsequent recessions has been reduced considerably. the journey has not been entirely problem - free, and the experiences we have gained on the way have prompted us to make some changes to practical aspects of policy, or perhaps rather as regards how policy is communicated to the public. we have also had to change and improve our analysis of inflation in different respects. i intend today to touch upon the problems we have encountered on our journey and how we have tried to deal with them. important to have explicit communication so what difficulties have we encountered as regards defining the inflation target in terms of the change in the cpi? to illustrate this i need first to say a few words about the principles that underlie the riksbank's interest rate decisions. like other central banks that have adopted inflation targeting, the riksbank has worked from the premise that monetary policy affects inflation with a certain lag ; it is generally assumed that it takes one to two years before a rate adjustment achieves its full impact on inflation. against this background, and as a step towards clarifying how we try to attain our target, we have formulated a simple rule for monetary policy : if the forecast of inflation one to two years ahead exceeds 2 per cent the repo rate should normally be raised, and if the forecast is below 2 per cent the repo rate should normally be lowered. to put it somewhat differently, but with the essence more or less the same, the rule means that monetary policy should normally be aimed at meeting the inflation target of 2 per cent cpi inflation one to two years ahead. the fact that we use primarily the inflation forecast one to two years ahead as a kind of intermediate goal for the real target of 2 per cent actual inflation means that temporary shocks that only have an impact on inflation in the coming year do not generally affect our rate setting. it is conceivable that drastic changes in interest rates could bring inflation back to the target faster than over one to two years. but such a policy would probably result in sharp, undesired fluctuations in both the real and financial economy. against this backdrop it could be said that we normally deliberately tolerate the target deviations that result from temporary

have a lasting effect on inflation. so against this background there could be reason when appropriate to present forecasts also in a slightly longer perspective so as to illustrate our assessment of these temporary effects. one advantage of this approach would be that it would enable the monetary policy discussion to focus more clearly on the target variable cpi. to sum up, i think we can conclude that the cpi has worked well in the new role that it was given some ten years ago - as a target variable for monetary policy. to the extent that problems have arisen, it has been a question of relatively limited pedagogical complications in the situations when the riksbank has judged it appropriate to depart from the simple policy rule for how the repo rate is usually set. in my opinion these problems are not so serious that they cannot be dealt with by the riksbank adhering to its ambition of striving to make monetary policy as transparent as possible. thank you.