who point to the ecb variant of pragmatism, as well as by those who think the interest rate should be lower and who see the fed's pragmatism as their ideal. this is a debate which in essence is based on misunderstandings. the constraints within which the riksbank works, allow a monetary policy which is both flexible and pragmatic. we can certainly extend our target horizon, monitor risks of problems in the financial sector or act early in order to avoid major subsidence in the economy further ahead. but this places requirements on us to motivate our actions clearly and substantially. it is, therefore, in this context – by setting very high standards as regards clarity and openness – that we beg to differ. in essence, i think that demands made on us that we should be more pragmatic in some general way – and not keep to our way of reasoning with a target, with guidelines, etc. – are meaningless. less clear principles for policy in combination with reduced transparency regarding, for example, the reasons for making decisions, will hardly lead to a policy which will be more successful in the future. many years'experience in the vicinity of economic policymakers suggests to me that the opposite is more probable. among the most important things one can do in this type of work is to try to build up clear processes which contribute to decision data, based on good economic analyses, being produced in a systematic way. and that this decision data is subjected to as wide an examination as possible. i am convinced that our ambition to be as clear and open as possible has served us well. starting with a numerical, symmetric objective and a guiding rule, in the way that we have done, we have been forced to think through every question with which we have been confronted in a more precise manner. this has resulted in our gradually increasing our understanding in a way which i think would hardly have been possible otherwise. certainly it is not yet over, and in this context, future developments will place new demands on us and impose further intensification and exactitudes. there is also a connection between transparency in relation to the outside world on the one hand, and internal work on the other. in getting rid of secrecy we were able to introduce a more realistic debate on monetary policy. this has allowed sharper and more specific criticism from outside, something on which we thrive. in addition, i think that decision making should be made in a way which contributes to

##rona trading given how the krona market functions in practice, there may be tendencies to give this type of factor too much weight as an explanation for the development of the exchange rate. more than 90 per cent of the krona trading is between different financial actors, and the majority of the krona trading is not in sweden but in major financial centres abroad. for example, almost 50 per cent of all krona trading takes place in london. there is nothing special about the krona here – that is the way it is for many currencies. but the point is that the vast majority of trading takes place between financial actors abroad. 1 / 4 bis - central bankers'speeches this is different from how the foreign exchange market is usually described in our economics textbooks. there, the description of the market is often based on trade flows that create supply and demand for the krona. in itself, this is also an important element in foreign exchange trading in practice. but if one looks at the flows of capital in the krona market, there are more often flows with other purposes : diversification of large funds'portfolios, hedging against losses due to exchange rate fluctuations and even pure speculation in how the krona will vary. for example, there may be strategies where investments are chosen based on the trend in the krona's movement and that the trend – recently a weakening – will continue in the future. the consequence of this is that trading in the krona is largely driven by purposes that do not necessarily place so much emphasis on the " fundamental " value of the krona. during periods, the exchange rate of the krona may therefore vary in a way that is difficult to explain by macroeconomic developments. economic research has branches that address this and try to explain why, for example, investment strategies that should not be profitable in efficient markets can still be so. and also why the capital flows that result from such " non - fundamental " currency trading can drive exchange rates. 2 the focus is then often on the microstructure of the foreign exchange market, where banks are market makers and act as intermediaries between buyers and sellers of currency. for example, as the market works, it may matter which actor initiates a foreign exchange transaction, and both the ability and willingness of intermediaries to take currency risk may have an impact on the way exchange rates move. in practice, this means that the krona exchange rate will function not only as a " shock absorber