. while recent information on the short - term outlook should obviously be observed, it is even more vital to look at indicators for longer - term developments. in effect the central bank has no other option – like god ’ s mills, the bank ’ s instruments grind slowly, but grind exceedingly well, if patience and foresightedness guide the way. the central bank has made no secret that the current strength of the krona is not sustainable in the long run. an important change this autumn and so far this winter has been large - scale issues of krona - denominated bonds in international markets. in particular, these issues are driven by the wide interest - rate differential between iceland and other developed countries. the current monetary bulletin attempts to analyse the impact of these issues, including a separate article dedicated to this topic. their impact can be positive. for example, it can lead to more efficient foreign exchange and securities markets in iceland, thereby benefiting domestic economic developments. however, the issues can also – at least temporarily – create uncertainty about the transmission of monetary policy and even intensify its impact effect through the exchange rate channel. such a pass - through hits export sectors hard, while doing little to subdue private consumption growth. one standard assumption underlying the inflation forecast published in the current monetary bulletin is that the policy rate will remain unchanged from the day of forecast. on the basis of this scenario, the board of governors decided to raise the policy rate by 0. 25 percentage points. the central bank ’ s monetary policy over the medium term will need to ensure that the exchange rate adjustment which appears inevitable in the long run does not result in a higher rate of inflation than is compatible with the target. a tight monetary stance will be required to do so, for as long as capacity and labour market pressures pose inflationary threats. furthermore, a sufficiently wide interest - rate differential with abroad must be maintained to contribute to a smooth exchange rate adjustment. the surge in house price inflation has reached a peak. if the krona remains relatively strong and stable, goods prices are also quite likely to fall. thus the outlook is for a slowdown in the inflation rate in the coming months, not least because the depreciation of the krona this year has only been passed on to the domestic price level to a limited extent. if the housing market cools more quickly than the central bank forecasts, house price inflation is likely to slow down even more sharply than is currently expected. foreseeable

##security. today the focus is on financial market infrastructure. one of the questions being asked in this section of the conference is, “ what challenges are likely to emerge with new operating models and new actors in the financial sector? ” as i said before, the fintech snowstorm is already here. the newest challenge with respect to cybersecurity is the emergence of new players offering financial services, some of whom have not provided financial services before. the question therefore becomes : what technology are they using? is it established, or is it new and unknown technology? we also know that attitudes towards security and operational risk are important. but with tech firms rushing to offer new products to the market, there is the risk of insufficient emphasis on security. this is a risk that must be monitored – not only for new products or for new players, but also for incumbent businesses. tech giants like google, apple, and alibaba look set to become dominant players. their advantage comes from providing cross - border services and having already gathered significant information about users. they are already present in the nordic marketplace. this development may lean towards monopolies, as it can create entry barriers for new and smaller players in the market. if that proves to be the case, it could have a negative impact on competition and go against the aims of the psd2 ( the recent eu directive on payment services in the internal market ( 2015 / 2366 ). this risk is greater when the payment mechanisms are outside the jurisdiction of the relevant state. then there is the question of supervision. will the new solutions be supervised, and if so, how? the challenge here is that many new solutions are global, and thus outside the european economic area or the european single market. such supervision thus requires crossborder cooperation among supervisors. the challenge for the supervisor is also to maintain a comprehensive overview of the market. for the legislator, it is a challenge to stay on top of rapid technological developments, as rules tend to lag behind technological changes. financial market participants must commit fully to guarding the system. cybersecurity needs to be promoted at all levels. with respect to this fast - changing technology, keeping one step ahead of antisocial elements is a constant challenge. as i see it, cooperation is the only way forward. it is vital that all financial system entities work together on all fronts – within and between countries – to identify and address vulnerabilities. we need to share both our successes and our