supply will affect the development of prices. monetary policy ’ s focus on price stability is important in the context of economic stability. while the possibility of fine - tuning an economy should not be exaggerated, a policy for price stability should normally lead to a real economic development that is also balanced. the riksbank ’ s representatives continuously talk about the prospects for inflation ; however, the question we are trying to analyse could equally well be put like this : how should the riksbank handle the repo rate so that the swedish economy ’ s favourable path in recent years is maintained? * * *

measures is to restore as far as possible normal market conditions and, along with the interest rate cuts announced by the ecb, to bring interest rates back to levels that do not hinder growth. the government guarantee should also contribute to the reestablishment of banks ’ mutual trust and to the normalisation of interbank lending. there are positive signs in this area as greek banks have started lending each other bigger sums for longer duration than overnight or one week. however, the process may encounter unexpected hurdles and, therefore, may be lengthier than it is desirable. necessary regulatory changes : what changes might be envisaged to financial regulation and the structure of the financial sector as a result of the current crisis? i will try to answer taking into consideration what is under discussion in the various international fora, bearing in mind the global nature of the current turmoil. as you are aware, a number of reforms have been put forward at the european and international level, notably by the ecofin council and the financial stability forum ( fsf ), and have recently been reflected in the declaration of the g20 summit. however, we will have to bear in mind that any changes will be implemented gradually and, in some cases, only after the crisis is over, especially those aiming to the control of risk taking, as the system is currently in reverse mode. there is a need for fair evaluation and strengthening of regulatory regimes, prudential oversight and risk management, and ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances. in the same vain and to the extent that they represent a substantial factor for the smooth functioning of markets, credit rating agencies will be required to meet specific standards. the philosophy of auto - regulation and “ markets know best ” as they care for the interests of the economy and of themselves has been wiped out by the ongoing traumatic experience. but we don ’ t want to go to the other extreme of over - regulation and nationalisation of the banks. the banking system will probably have to operate with higher capital buffers than prior to the crisis, in order to address specific loopholes revealed by the crisis, to meet increased capital requirements calculated under pillar 2, especially after the data concerning the crisis period will be fed into the internal capital calculations. the merits of introducing a limit on the leverage ratio of financial institutions are also under examination, which also might call for more capital. liquidity risk now urges for more attention by both banks and regulators