kristina persson : monetary policy in a low - inflation economy speech by ms kristina persson, deputy governor of sveriges riksbank, at the stockholm strand rotary club, stockholm, 18 february 2005. the references for the speech can be found on the sveriges riksbank ’ s website. * * * introduction thank you for the invitation to take part in this morning seminar. i intend to begin by giving my views on the current prospects for the economy and inflation, including the risks associated with, among other things, the unwinding of the present global imbalances. i will do so against the background of the minutes from this year ’ s first monetary policy meeting, which were published last week and which gave an account of the executive board ’ s discussion on 27 january. then i will discuss the riksbank ’ s remit, different ways to conduct monetary policy and the possible implications of the low inflation rate for future monetary policy. the current monetary policy situation since christmas the news flow has been dominated by the huge tidal wave disaster that hit the countries in the indian ocean. despite the scale and extent of the disaster the consequences for the world economy will probably be very small. that at least has been the conclusion from the different international meetings that have taken place after christmas. international economic activity is thus expected to continue to strengthen and resource utilisation in the world economy to become increasingly higher in the coming years. inflation has risen slightly in most countries, owing mainly to the increasing oil price. but excluding oil, inflation has not risen at the same rate. there are plenty of spare resources in several of the biggest economies, and in recent years competition has toughened in many industries. as a result, international inflation is forecast on the whole to be relatively moderate in the coming years. the economic situation in the us and the euro area in the us the economic situation is continuing to improve. in the fourth quarter last year gdp in the us rose by 0. 8 per cent compared with the previous quarter, partly due to a sharp increase in investment. this reflects a benign investment climate in the us with historically high profits and optimism among firms. indicators of growth prospects for the fourth quarter provide a positive picture of the activity level in the us economy. as resource utilisation has picked up the federal reserve has raised its key policy rate from 1 per cent to 2. 5 per cent. many factors suggest that we can expect the tightening to continue in the spring. inflation is estimated

would greatly improve the image of the region in front of the international community and it would make our final aspiration for eu membership easier to achieve. on the other hand, i think that we should benefit from the work in group for yet another reason. regardless of the different levels of the countries ’ developments and despite many other geopolitical factors, i hold the opinion that in the fields of economy, the banking sector, structural reforms, finance and markets, we show the same symptoms and to a certain degree, priorities converge. this is why i think that foreign assistance will be more effective. this is why i think that the several projects that may be prepared by the foreign donors would be more effective. i think that the region will show more or less the same progress without creating wide contrasts which – according to a long - term perspective – could emerge as serious problems. i hope that the agreement we signed today will only be the first step in the long road towards the comprehensive cooperation between our two institutions. personally, i consider the fields of payments, research, human resources and statistics as other areas of reciprocal interest. cooperation should be concrete and should serve to the adoption of better standards, as well as to the exchange of opinions with regard to various matters related to the regulatory framework. as regards the agreement of understanding in the field of banking supervision, i would like to emphasize the fact that a standard model which is in compliance with the european directives and the basel committee has been adopted. this is a concrete and appropriate common commitment with regard to cooperation in the field of supervision. it is worth mentioning that both parties, among other things, will extend their cooperation in the field of organizing common events as well as various training programmes of common interest. 1 / 2 personally, i think that the bank of albania has already developed its supervisory and analyzing capabilities to a satisfactory level, and as a consequence, i think that our assistance in this field will be useful. at the same time, i think that in the banking and payments authority of kosova, as a more recent institution, these capabilities are being developed at a satisfactory pace and i believe that its staff holds many practices and findings that they could offer to their colleagues at the bank of albania. at the conclusion of this short speech please let me express once more the great pleasure that this visit gives to me. i avail myself of this opportunity to assure my kosovar friends that they will always find in me and in the bank of albania an open window not