needed for long - term economic efficiency, going forward, the appropriate degree of opening or pacing through time will remain an issue for controversial debate. ladies and gentlemen, the third part of my talk today focuses on “ international rules of the game ”. on trade and financial integration, we all have to wait for the resolution of wto negotiations. in the meantime, thailand and asean have made progress on a number of free trade arrangements with japan, china, korea, australia, and new zealand. within asean, more progress on the asean blueprint, which lays out the strategic plan to achieve further trade and financial integration within 2015, is in the pipeline. on this topic, i also like to share with you an observation that asian emerging markets, in general, rely increasingly more on trade integration because it is judged to be a safer mode of risk - sharing with the world. while benefits from trade integration are universally appreciated, net benefits to overall economic development from the international financial integration have not been so apparent in asia. as a result, while the pace of financial integration has far outstripped trade integration in advanced economies, it has only managed to keep pace with trade integration in emerging markets. turning to the financial sector side, nowhere are the international rules of the game closer to my heart than the international standards for banking supervision. early this year, the bank of thailand ’ s capacity and performance in supervising financial institutions has been assessed against international best practices in the context of the joint imf / world bank financial sector assessment program or fsap. this fsap assessment confirmed the strength and capacity of our supervisory process, which have been significantly strengthened over the past decade. moreover, the fsap assessment also strongly supports our goal to ensure that our regulatory and supervisory responses keep pace with the financial intermediaries and the products they offer. in this endeavor, the bank of thailand has put emphasis on robust stress testing, enhanced counterparty risk management, and safe and efficient market infrastructures. our financial and legal infrastructures will continue to be strengthened particularly through the introduction of a number of legislations and amendments. the new deposit insurance act and the financial institutions business act are in the pipeline. specifically, the financial institutions business act will stipulate prompt corrective action and grant the bank of thailand power to conduct supervision on a consolidated basis. in addition, it will also foster supervisory independence and the ability to supervise a broader set of systemically important institutions, including non - banks, as well as provide the

that inflation can return to the target in the foreseeable future. this leads to the longer - term inflation expectations in the economy rising. wage increases are based on inflation being more permanently high, and in this situation companies do not see any major problems with continuing to raise prices – a price - wage spiral like the ones in the 1970s and 1980s starts. fiscal policy focuses on broad - based support rather than on more targeted measures. this drives up aggregate demand in the economy as a whole and contributes to the high inflation rate becoming entrenched. here, the interaction between fiscal policy and monetary policy again becomes inadequate. 10 to curb inflation, the riksbank must raise the policy rate considerably more than we now expect. 11 since households and companies are heavily indebted, this can have very significant negative repercussions. even in such a worse scenario, inflation will eventually return to the target, but it will take longer and be considerably more painful for everyone in sweden. of course, it is not necessary for all of this to go wrong to 10 an illustration of the importance of interaction between fiscal policy and monetary policy is the market reac - tions triggered by the uk government's proposal for a mini - budget on 23 september. the proposal was judged to counteract the bank of england's attempts to slow down inflation and was considered not credible. interest rates rose significantly and the pound sterling weakened significantly. see the article “ alternative scenarios for inflation and monetary policy ” in monetary policy report november 2022 for examples of developments if inflation were to be higher than in the riksbank ’ s forecast. 9 cause a bad scenario with more permanently high inflation. it is enough that some of it does. interaction important even when inflation is too high let me round off. i often point out that the inflation target is not just the riksbank ’ s target but is a target for society as a whole. of course, it is the riksbank that is appointed to attain it, but how well this succeeds is of great importance from a much broader economic perspective. there is strong political support for the inflation target, which, in turn, is based on the conviction that the economy simply works better with a specific, low and stable inflation rate. the development we have had since the introduction of the target also indicates that this is indeed the case ( figure 7 ). over the past decade it has become clear that a system where responsibility for the inflation target is seen as entirely resting with