more drastic. meanwhile, economic agents can continue to count on stable, low inflation. an example of the good results that can be achieved with a forward - looking monetary policy is the us economy. with a judicious and timely tightening of the monetary stance, the federal reserve has contributed to a long period of sustainable growth. since the gradual increase from 3 % between 1993 and 1994, the fed funds rate has fluctuated between around 4. 5 and 6 %. this has accompanied a notably good economic development, with the longest postwar period of unbroken growth. the latent inflationary pressure has been held in check without arresting growth. similar reasoning lay behind last week ’ s interest rate increase. the positive trend has been aided by the consolidation of federal finances. on the other hand, if inflation has already risen to a high level that is expected to last, the central bank may have to resort instead to larger interest rate increases to signal its determination to fulfil the inflation target. that weakens economic activity and risks a renewed increase in unemployment. thus far the argument – and the question of which alternative is most advantageous – seems fairly simple. but that is where the difficulties begin. how is the central bank to arrive at an interest rate increase that is appropriate in its timing as well as its size? a large, abrupt increase might lead to demand being curbed too early and too much, along with the risk of inflation falling below the price stability target of 2 % 1. that is naturally not desirable. which brings me to the second question : what rate of gdp growth can the swedish economy sustain without inflation taking off? how strongly can the swedish economy grow? in situations involving rapid changes, there is a tendency to affix labels such as the new economy. the logical implication is the existence of an old economy that works less well. i find this misleading. there have been periods in sweden ’ s economic history when the economy performed exceedingly well ; one example is the 1950s and 1960s. there have also been periods that were less successful, for instance the 1970s and 1980s. the concept of a new economy might be apposite if the comparison is confined to the present and the preceding decade. there are signs that the swedish economy is functioning better in the 1990s than it did in the 1980s. but what does this concept actually stand for? one of the many interpretations of the new economy is that long - term growth ’ s trajectory has shifted upwards on account of a better productivity trend. for

instruments that can cover losses if the bank should fail ( gone concern ) – for example, unsecured debts with long maturities that cannot be redeemed. the crisis has shown that, above all, it is common equity tier 1 that can be counted on when the tide turns for the worse. all in all, the banks ’ capital position will be strengthened considerably compared with previous regulations, contributing to the boosting of confidence in the individual banks and in the system as a whole. … clear measures for liquidity … in the autumn of 2008, we saw how a lack of confidence in the financial markets rapidly led to liquidity problems. so one priority for increasing financial stability has been to ensure the banks are able to manage liquidity problems in the short and long terms. the basel committee is thus introducing quantitative liquidity requirements for banks for the first time. basel iii works with two liquidity measures – one short - term and one long - term. the shortterm measure is based on, in principle, every bank having sufficient liquid assets to survive for at least 30 days. it is difficult to see such a requirement as unreasonable. the long - term measure, in principle, limits the gap between the maturity of a bank ’ s assets and the maturity of its debts. this limits the duration risk of the bank. … and particularly the regulation of systemically - important banks a particular focus has been placed on systemic risks and the most systemically - important institutions. to a great extent, this is a work in progress. so far, the basel committee has in principle, basel iii defines common equity tier 1 as share capital and previous profits. bis central bankers ’ speeches identified almost 30 global systemically - important banks ( g - sibs ). the list was published last week and includes one of the major swedish banks, as you may have noticed. the committee feels that it is particularly important that these banks have extra strong resilience. those identified as g - sibs should thus have an additional capital buffer, the size of which depends on how systemically important each bank is deemed to be on a global level. a framework should be put in place for how the authorities in different countries should handle them if they find themselves teetering on the brink. in addition, the supervision of these banks should be particularly intensive. work to identify which banks are systemically important on the regional and national levels will also start soon. this work is, of course, particularly interesting for us in sweden