from arguing with each other. that i thing is wise because the system is rather fragile. let me conclude by referring back to my opening remarks. the financial markets are becoming increasingly integrated, banks are crossing more and more boundaries and so on. all this is affecting the riksbank to a high degree. the same is true of the rapid technical innovations, with increasingly complex payment systems. add to this the possibility of emu and you can see the future does not lack challenges. apropos of what i have been talking about today, a while ago one of my american colleagues, bill mcdonough, said something to this effect : we should be pleased if we are better today than we were yesterday at the same time as we are not yet as capable as we will be tomorrow. i think that's about right.

inflation? the riksbank act states that monetary policy ’ s objective is to maintain price stability. partly in order to make the policy intelligible and open for assessment, the riksbank has decided that inflation - measured as the annual change in the consumer price index ( cpi ) - is to be held at 2 %, with a tolerance interval of ±1 percentage point. motivating low inflation is not difficult. a great deal has been written on the subject. but perhaps it will suffice to recall the swedish experience in the 1970s and 1980s. the high and widely fluctuating rate of inflation had clear negative effects on our economy. productivity gains and investment growth in that period were low. sharply rising prices led to an arbitrary redistribution of income and wealth. in order to rectify the corporate sector ’ s competitive position, the value of our currency had to be written down on a number of occasions. bit by bit, however, more and more people, regardless of which political party they supported, realised that this economic policy could not be sustained. so in the early 1990s, sweden finally joined the growing number of countries that had chosen to re - focus their policy on low inflation. but while it is not difficult to advocate low, stable inflation, it is less easy to argue that just 2 % is the appropriate rate. when the inflation target was adopted in 1992, it was noted that this was approximately the level of ambition that important countries had chosen. moreover, inflation was currently around that level when the decision was made. alan greenspan has argued that inflation should be so low that people generally do not give it a thought when making economic decisions. that points to 2 % as a reasonable level. there are some objections, however. some argue that an inflation target ought to be higher. one reason has to do with the downward rigidity of nominal wages. we know from experience that wages rise, sometimes so much that they generate inflation. downward wage adjustments are less frequent. seen from this angle, inflation might be regarded as a smooth way of achieving necessary adjustments to real business costs. another risk, according to some observers, is that an unduly low inflation target leaves too small a margin for monetary policy. the economy is liable to land in a situation where the central bank is no longer in a position to influence the development of prices by pushing the real interest rate down. it simply is not possible to reduce the interest rate below zero per cent. as i see it, the