itself, a formidable challenge. in practice, analysts can rely on early warning indicators and models, indicating when clusters of financial institutions or markets of systemic relevance are approaching “ danger zones ”. in assessing the resilience of the system, macro stress tests have become an important part of the risk assessment tool - kit. they can also help in prioritising the risks identified and are a pertinent tool to support the formulation of policy recommendations. central banks and supervisory authorities around the world are working to enhance and develop these tools. in my view, the european systemic risk board ( esrb ) can make a significant contribution in fostering systemic risk analysis, coordinating analytical efforts and concentrating central banking and supervisory expertise from all eu countries. i am also confident that the role of the esrb in translating risk assessments into appropriate riskprioritisation, early warnings and concrete policy recommendations to mitigate systemic risks will contribute to the much more resilient eu financial system we are all looking forward to.

will develop in future. one contributing factor could be that the interest rate in this economic cycle has been cut to a historically low level and this has led to exaggerated optimism regarding interest rates. bond rates have also fallen to historically low levels both in sweden and in many other countries. this could have further fuelled the optimism regarding interest rates. of course, it is not easy to know whether these are important mechanisms or what can be considered a reasonable interest rate level in the long term. however, the longer the time that passes without the rate of increase in house prices being subdued, the greater the unease that imbalances will build up in the housing market and in households ’ debt / equity ratios. so how should monetary policy take this type of risk into consideration? this is a question that has been much discussed in recent years, both between central banks and within the academic world, as house prices have also risen rapidly in many other countries. however, there is unfortunately no common view that we can lean on. we will probably have reason to return to these issues when our and other peoples ’ experiences of the fluctuations in asset prices have increased and when progress is made in the academic research in this field. it will also be interesting to see the independent assessment of monetary policy ordered by the committee on finance and which is expected to be ready soon. however, it is not possible for decision - makers to sit back and wait to become wiser and more experienced. at the riksbank we do not consider it to be reasonable to entirely ignore the risks entailed in the rapid increase in borrowing and the house prices rises, although we cannot easily take these risks into account in our usual forecasts of economic developments over a couple of years. if it proves to be the case that economic imbalances are building up, they will sooner or later need to be corrected. when these corrections occur, the result could be weak development of the economy over a long period of time. we have therefore acted to reduce the risk of this scenario to some extent and to contribute to a calmer adjustment in house prices. we have done this by highlighting the risks entailed in the rapid credit expansion and by beginning the interest rate increases that were already on the table slightly earlier than would otherwise have been justified. i would at the same time like to emphasise that this does not mean we have downgraded our inflation target. on the contrary! we believe that monetary policy that is active and forward - looking, but at