was also considered to be well in line with the ambitions in other countries in europe. since 1993 the way the riksbank works has been developed quite a bit. this applies to our internal procedures, the intellectual policy framework and our external communication. since this has been my primary task during the last five years, i could go on speaking about it for ages but i shall confine myself to a set of issues related to the role of the inflation forecasts and policy rules. in my opinion, the focus on the combination of a specific, symmetric target and published forecasts set by the policymakers has been important for monetary policy ’ s credibility. by consistently presenting our forecasts and acting accordingly, we have created greater freedom of action than would otherwise have been feasible. it has been a short - cut to credibility. my favourite example is the autumn of 1998. at that time, in the midst of a fairly lively discussion of interest rate policy, similar to that in the rest of europe, we managed to cut our rate in several rapid steps without being accused of political bias. we could make our point by referring to a very concrete picture of our view on inflation. it is sometimes said that you need a firm foundation before venturing to publish forecasts. i don ’ t subscribe to that. admittedly the riksbank began by just compiling inflation indicators. it was not until 1996 that we published really comprehensive accounts of economic tendencies and inflation, followed in 1997 by the first projections of inflation. however, i personally believe that an understanding of how the riksbank acts could have been achieved sooner if we had started earlier with fuller accounts of inflation and stuck to them in policy. in this context the recent brasilian experience is interesting. in time the policy framework was augmented with what could be called a rule of action or a policy rule. we made it clear that if inflation is expected to exceed the 2 % target in the coming one to two years, then we will normally raise the interest rate and vice versa. this formulation reflects our judgement that policy ’ s effects mainly occur after a time lag of twelve to twenty - four months. the rule of action has made policy even clearer. in principle, by relating new information to our most recent forecast, market players are in a good position to form a picture of policy ’ s direction and we can see that when we compare their forecasts of the repo rate with our own. however, one should be aware that there is a risk that

financial imbalances must have been allowed to build up during the preceding period. in other words, monetary policy makers must have seen no reason or been unable to prevent these imbalances from building up. thus, an important question is whether a monetary policy for price stability will indirectly prevent excessive debt accumulation in the economy? in other words, how likely is it that large imbalances will have time to build up before the central bank judges that its inflation target is threatened and therefore raises interest rates? can large imbalances materialise without inflationary pressure building up? a related question is whether the choice of monetary policy strategy has a bearing on the risk of financial imbalances and financial crises? for example, will a monetary policy based on a simple policy rule lead to a lower or higher risk of financial imbalances building up compared to a more discretionary policy? will an inflation targeting regime lead to a larger or smaller risk of imbalances building up compared to a monetary targeting regime? these highly relevant questions are being asked by a number of central banks in emerging markets that have recently been forced to abandon a fixed exchange rate policy that was no longer sustainable. the papers to be presented at this conference will hopefully throw some light on a number of the questions i have raised here this morning. i look forward to learning what our distinguished guests have to say on these matters.