crisis years 1991 - 93, when nominal long - term rates stood at 12 per cent, was a result of high risk premiums on swedish bonds owing to lenders ’ concerns after a period in which the government debt had risen dramatically. thirdly, balanced government finances allow automatic stabilisers to have their full effect. this means that demand can be sustained in the economy thanks to unemployment benefit and other factors when economic activity slows if the government finances are in such shape that there is sufficient economic leeway to finance the automatic stabilisers. generally speaking a more stable climate benefits the economy in many ways. lower inflation brings with it lower volatility in inflation. in this way uncertainty diminishes and therefore also the risk premiums in the fixed income market, thus leading to improved efficiency in the economy. economists also say that the price mechanism works better when inflation is low. this means that changes in relative prices become more evident the more stable the general price level is. there has also been a marked stiffening of competition as many markets in a large number of countries have been deregulated or re - regulated with the express purpose of lowering barriers to entry and increasing price competition. another contributory factor is the rise in productivity that increasingly appears to be a reverse in the trend. in the us and a number of european countries, including sweden, labour productivity has increased considerably faster since the middle of the 1990s. in sweden productivity growth in the business sector averaged 2. 7 per cent during the period 1995 - 2001. it has risen further since then, although cyclical effects have presumably something to do with this. we will have better information regarding the durability of the rise in productivity when the business cycle matures and employment picks up. it is worth noting that low inflation in the world economy has not come at the cost of higher volatility in the real economy. instead gdp growth has also stabilised during the 1990s and current decade, as indicated by the recent, mild downturn. prices of commercial property are following the economic cycle lower inflation and lower volatility in the inflation level has not led, however, to lower volatility in the prices in asset markets. as we all know, developments in the equity market have been unusually dramatic since 1995, with a steep rise up until spring 2000 and then three years of price declines. in the property market price developments have been somewhat more orderly, and less dramatic than they were at the end of the 1980s and beginning of

different stages in the monetary policy process does not correspond to how the forecasting and policy - making work is carried out since the new repo rate path was introduced. in their view, the changes have meant that, in practice, the actual interest rate decision has been brought forward. they therefore recommend that the riksbank should announce the monetary policy decision and bis central bankers ’ speeches interest rate path earlier, namely directly after the meeting of the executive board that is held a couple of days after the second monetary policy group meeting. however, we consider this proposal to be difficult to implement. although the analyses and forecasts are largely complete by the second monetary policy group meeting, the monetary policy decision is made at the monetary policy meeting and not before then. any reservations against the decision are put forward at this meeting, too, and not earlier. in conclusion, let me once again thank professors goodhart and rochet for their valuable contribution to our continued work on both monetary policy and financial stability. we will have many opportunities during the course of this work to discuss with the committee on finance how we can develop and improve our analyses. bis central bankers ’ speeches