and inflation have been adjusted downwards considerably and have indicated scope to reduce the interest rate in order to bring inflation back to the target a couple of years ahead. monetary policy is and must continue to be forward looking. as i suggested earlier, the theme of deflation has begun to appear in the international debate. i commented on this at our latest monetary policy meeting. my view was that the threat of deflation should not be exaggerated and that there are major differences compared to the 1930s, the period that people often refer to in this context. one important difference is that central banks and governments around the world are taking strong measures to support the financial system and stimulation packages have been launched to counter the economic downturn. we forecast that the rate of inflation will decline rapidly in 2009 and this will probably mean that people will continue to talk about deflation. if so, it is important to remember why inflation is falling. a large part of the explanation comprises falling energy prices and falling interest expenditure ; that is factors that are favourable to growth. and it is also important to remember that a temporary fall in the rate of inflation towards zero, or even below zero, should not be confused with a prolonged process with falling prices that affects long - term inflation expectations. in the latter case, consumption and demand may come to a halt, which could further reduce inflation expectations and thus affect demand in an ongoing negative spiral. our forecasts, and those of most other experts, indicate that growth will recover in 2010 and that inflation will then increase. expectations of generally falling prices over a long period of time should not thrive in such an environment. we expect the financial crisis to peter out during the course of the year that has just begun. however, the analysis of what has happened and of what needs to be done in terms of regulation will continue. the discussion of the consequences for monetary policy and the monetary policy framework will also continue. one question that will probably arise again is whether, and if so how, central banks should take the development of credit and asset values such as property prices into account. this has been a controversial issue in the international debate in recent years. in the light of the events of the autumn, this issue will probably become topical again.

rate. before i talk about our most recent interest rate decision i shall discuss in slightly more detail how the financial crisis has affected monetary policy and how other measures by the riksbank have been activated. monetary policy and the financial crisis in principle, one can say that monetary policy is working as normal within the framework that has been in place since 1995. and unlike earlier crises, not least that at the beginning of the 1990s, we have in the storm now raging a credible nominal anchor for the economy in the form of an inflation target. i think this is worth pointing out. it is actually thanks to the credible inflation target that the riksbank has the flexibility to forcefully counteract the negative effects of the financial crisis on production and employment. of course, the financial crisis means that the circumstances for conducting monetary policy are abnormal. for example, there have not been many occasions when the economy has ground to a halt in the way that has happened in recent months. this creates challenges for monetary policy. one such challenge is that historical relationships in the economy have to some extent changed as a result of the crisis. one contributory factor to the repo rate needing to be cut so much during the autumn was that rising risk premiums in the wake of the financial crisis meant that the normal link between the short - term market rates and the repo rate was broken. this was indicated by the reactions to our reduction of the repo rate by a total of 1 percentage point in october. the market rates fell to a much lesser extent. on the other hand, the market rates followed the repo rate downwards in december. moreover, the opportunities for households and companies to borrow money have been restricted because access to credit has declined. the difficulties for banks and other lending institutions to find funding became acute when the financial crisis also hit sweden with full force. they were forced to accept funding at shorter and shorter terms as these were the only markets that continued to function. in this situation the riksbank intervened by, for instance, offering the banks loans at 3 to 6 months, that is, at much longer maturities than the daily and overnight loans normally offered. we took these measures to improve the functioning of the markets and to make it easier for the banks to continue to provide loans to households and companies. we will continue to offer this form of liquidity support as long as is necessary. the extraordinary measures taken by the riksbank thus aim to ease the supply of credit and improve the functioning of the market