should default. this applies for amounts of up to sek 250, 000 per customer and institution. it is only if the deposit has been made by another financial institution or in some cases if the amount is frozen that the deposit guarantee does not apply. this reasoning concerned what we could do in a situation where financial stability is threatened. some central banks have recently been forced to take this type of measure. but none of the swedish banks has had problems with its liquidity in the way i described in my example. so how do we view the current situation? recent developments as i mentioned earlier, the financial turbulence has been included in our analyses for some time now, both with regard to monetary policy and financial stability. the riksbank has regularly emphasised many of the risks in the financial system and what could happen if the financial turbulence should grow worse. the riksbank bases its assessment on an analysis that focuses on the four major swedish banks, as they account for around 80 per cent of the market. the swedish banks have considerable equity, good profitability and limited loan losses. our assessment is that there is a high degree of resilience to the international turmoil that has prevailed for some time now. but this is not the same as saying that the swedish financial markets and banks are not affected by the situation. of course they are. the financial markets have been affected more noticeably the international markets where the banks obtain funding by taking out bond loans have been functioning poorly. borrowing has become more expensive and more difficult. normally the financial market participants trade with one another and thus contribute to the smooth functioning of the market. however, recently above all mutual distrust has meant that they are more wary of lending money to one another. one can say that this has “ thrown sand in the wheels ”. many central banks and other government agencies are trying to counteract this, as i will discuss shortly. this has also affected the swedish banks, although the problems have been less serious here than in many other parts of the world. we can observe that short - term interest rates have now risen substantially in sweden, too. this applies, for instance, to the interbank market, which is the market where the banks borrow money from one another to cover their short - term liquidity needs. however, in this context it is worth pointing out that the overnight market has functioned as usual and that the overnight rate, the shortest interest rate in the economy, has remained stable around the repo rate. in this way the

crisis. at the same time, however, monetary policy became highly complex and difficult to understand for some non - experts. outside japan, there are various debates over why the target level of inflation should be 2 percent, or what would be the most desirable inflation rate. recent studies increasingly suggest that the desirable inflation rate be positive in view of preventing a risk of falling into deflation, based on the experience of the global financial crisis from 2008. however, the proposed specific figure ranges widely from a positive rate close to 0 percent to around 6 percent. meanwhile, seiji adachi argues that, using the data for japan's economy from 1983 through the second quarter of 2017, the inflation rate that would be achieved under certain conditions in a time of an inflationary regime is 1. 94 percent in terms of the cpi inflation rate excluding fresh food and energy. for details, see adachi seiji, " 2 pasento no infure mokuhyo wa dato ka, " keiki to saikuru, no. 64 ( 2017 ) : 3 - 16. the bank has been making a wide variety of efforts including conducting on - site examinations and off - site monitoring of individual financial institutions, providing a wide range of information such as through the financial system report, and cooperating with relevant regulatory authorities in the development of financial regulations. some appear to have joked that central banks'public statements can only be understood by those with a ph. d. in economics. it is true that the bank's current policy is somewhat technical, and we are expected to communicate in detail to gain understanding from experts including market participants and overseas authorities. nevertheless, it is important for central banks to reach out not only to experts but also households and firms, which play the main roles of and are driving forces for japan's economy. 11 regarding households and firms, i am aware that it is important to reiterate the essence of the policy - - that is, what the bank aims at and how it seeks to achieve this - - rather than the details that tend to be highly technical. for example, according to a survey conducted by the bank, many households think that their circumstances become worse off when prices rise ( chart 10 ). no one welcomes price rises when their own income does not increase. thus, it may seem natural that households'tolerance of price rises would not increase easily, but wages generally grew at a higher pace than inflation and households'purchasing power rose in the past