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.

judging from the expectations of economic agents, a low - inflation regime has now been established. the composition of growth has also been favourable. after decades of growth that was generated to a high degree by rising consumption — with an accumulation of external debt — it is a healthy sign that expansion been associated with strong export demand and industrial investment. one result of this, the large current - account surpluses since 1994, has made it possible to repay external debt. a dramatic turnaround has also been achieved in government finances. massive budget deficits have been succeeded by a surplus. this trend is primarily a consequence of the economic recovery, just as declining activity was the main cause of the earlier fiscal collapse. but without the extensive measures for budget consolidation, neither the economic upturn nor the improvement in government finances would have been feasible. tax increases and spending cuts on the scale we have experienced in recent years obviously leave their mark. household income has been sharply restricted, particularly in 1995 – 96. so have public activities. in one respect, moreover, the outlook is still troublesome, namely as regards employment. despite the economic recovery, a rapid expansion of employment has proved difficult to achieve. it is worth noting, however, that the number of private sector jobs, in services in particular, has in fact been rising continuously since 1995. but this has not made up sufficiently for the contraction of employment during the 1990s in, for example, the public sector and construction. after this review of developments in recent years, i shall now discuss the riksbank ’ s appraisal of the coming twenty - four months, which is the period we need to consider when conducting monetary policy. 3. the message in june in the latest inflation report last june the riksbank presented an economic forecast for sweden and its implications for the path of inflation up to the middle of the year 2000. our assessment was that the trends in recent years, with high growth and low inflation, would continue in the years ahead. the economic upswing was assumed to continue in the forecast period, with annual growth rates around 2. 5 per cent this year and 3 per cent in the next two years. the forecast involved an increasing contribution from rising domestic demand, accompanied by a successive fall - off in export growth. private consumption was expected to pick up, partly in view of rising household income. - 3notwithstanding the prospect of further good economic growth in the coming years, the riksbank judged that the rate of inflation would remain low and