irma rosenberg : the objective of monetary policy speech by ms irma rosenberg, deputy governor of the sveriges riksbank, at a meeting arranged by a – hman fondkommission, stockholm, 14 february 2006. * * * a discussion has recently taken place in the media on the objective of monetary policy. some have argued that we should have more objectives while others considered that we already work with too many objectives and that this has created a lack of clarity. in my opinion this discussion is a bit misleading. we have one objective : keeping inflation low and stable. however, in our efforts to achieve this objective, we have, like many other central banks, opted to be flexible to avoid exposing the economy to strain. our statutory objective is to maintain price stability. it has been left to the riksbank to decide on the detailed interpretation of this objective. we have defined it as meaning that inflation should be 2 per cent. however, monetary policy affects the economy with a time lag and is simply not precise enough to maintain inflation at a constant 2 per cent. the inflation target includes a tolerance interval of + / one percentage point to underline that temporary deviations are permitted, provided that these are not too large. for further clarity, we apply the principle that in the event of any deviation, inflation should normally be brought back to the target within a two - year period. when we set the interest rate, we must accordingly base our decision on an inflation forecast. in most cases, this two - year horizon provides us with the scope to return gradually to the target without having to apply monetary policy with such force as to create unnecessary fluctuations in the real economy. occasionally in the wake of a major disturbance, there may even be grounds to allow a period of more than two years to return to the target. in such cases, however, we should communicate this clearly. like most central banks with inflation targets, we apply what is usually referred to as a flexible inflation target policy. when we decided at the most recent monetary policy meeting to increase the repo rate, we once again had to take into account the continuing rapid increase in house prices and household debt. this was not because we have a target for household debt or house prices. however, it is important for us to monitor the trend in the housing market, bearing in mind both financial stability and price stability. as far as financial stability is concerned, there are no indications that house prices or household debt constitute a threat

mr. george weighs up the pros and cons of european monetary union speech given by the governor of the bank of england, mr. e. a. j. george, at the bankers club annual banquet held in london on 3 / 2 / 97. i ’ ve been a follower of jim wolfensohn for the past 20 years, and it is a great pleasure to follow him again this evening. i first came across him when he was an extraordinary investment banker reputedly flying the world with his cello strapped securely in the adjacent seat. his eventual appointment to the presidency of the world bank was inspired. he brings to it an outstanding professionalism. but - as you have heard this evening - he brings to it also a broad humanitarian vision and total commitment to the world bank ’ s task of improving the lives of people in those parts of the world that still need outside official help with their reconstruction and development. president wolfensohn ’ s canvas tonight has been global. my own focus will be on europe, and in particular on european monetary union - though it ’ s fair to say that emu could well have significant consequences for the global economy. this country is widely regarded elsewhere in europe as being bloody - minded and even obstructive about monetary union, largely because there is indeed an intense, and often impassioned, debate going on here about the pros and cons. and so there should be. it ’ s a momentous enterprise, with potentially enormous implications for europe ’ s political and economic future. the simple fact is that there are real risks as well as real potential benefits in monetary union ; and it would be foolhardy just to assume that the enterprise, if it is embarked upon, will inevitably bring about the political harmony and economic prosperity across europe that anyone in their right mind wants to see. it is hugely important to all of us that europe ’ s political leaders stand back and weigh the risks as well as the potential benefits, dispassionately, before any irrevocable step is taken. if the debate in this country encourages open debate elsewhere then we will be doing a service to europe as a whole. it is something of a fashion these days to describe economic conditions in terms of fairy stories. i have heard the steady expansion in the united states, and more recently in this country, described as the “ goldilocks ” condition - with the economic temperature not too hot, not too cold, but just right. in the