and on other credit markets. this can also be seen in a measure called the ted spread, which i have also shown earlier to the committee on finance ( figure 2 ). the ted spread is the difference between an interest rate in the interbank market and a government bond rate, both with three - month maturities. the measure provides an indication of the confidence between the banks. the ted spreads have gradually fallen and for some time have been at around the same levels as in summer 2007, before the financial crisis became acute. although measures such as the central banks ’ loans to the banks have probably played a role here, the low ted spreads indicate increased confidence and a more stable situation in the interbank market. figure 2 more stable situation in the financial markets the difference between interbank rates and government bond rates ( ted spread ), basis points sources : reuters ecowin and the riksbank another healthy sign is that individual problems have not spread exaggerated unease in the financial markets around the world. i refer here to dubai world, for instance, which defaulted on its payments earlier in the winter and has since suffered new problems, and to greece, which is struggling with very poor public finances. a further example is the economic problems in the baltic countries. while these events are reminders in themselves that we still have some way to go before we can declare this crisis completely over, if the same things had happened in autumn 2008 the waves of turbulence would probably have been much higher and affected markets far from the eye of the storm. we are now on firmer ground – or on safer ice, if you prefer. a further positive sign is that activity in the financial markets has increased after being very low in some cases, particularly during the most intensive phase of the crisis. for example, it appears easier for companies to fund themselves directly in the markets. when will the central banks and government phase out their support measures? the extensive measures taken by governments and central banks around the world to counteract the effects of the crisis have contributed strong economic stimulation. but in many countries some of the measures, however necessary they may have been, have led to much poorer government finances. in countries such as the united kingdom, ireland, spain, greece and the united states public finances are under great strain, for various reasons. this means, for instance, that there is a risk that the long - term interest rates in these countries will rise quickly, which to some extent has already happened. this in turn can hamper the economic

stefan ingves : introduction on monetary policy speech by mr stefan ingves, governor of the sveriges riksbank, to the riksdag committee on finance, stockholm, 4 march 2010. * * * this figure ( figure 1 ) is one i showed the committee around a year ago. at that time, acute crisis management still required most of our resources. i compared our means of handling the climax of the crisis to an ice - skater who notices that the ice has suddenly become very thin, or unexpectedly begun to crack just in front of him. then there is only one sensible alternative – to make a sharp turn and try to return to safer ice as quickly and smoothly as possible. to act quickly and forcefully. this is what we did, but the ice under our feet was still uncertain. figure 1 on safer ice and with the acute crisis behind us photo : fredrik edin, cykloteket racing team today the situation is different. and the picture of the lovely, thick ice stretching ahead of the skaters in the sunshine is actually more appropriate now than it was one year ago, both literally and figuratively. we have safer and firmer ground beneath our feet. we have entered a new phase of the economic recovery and the acute crisis is behind us. but we are now facing new challenges and considerations. the work on preventing future crises is both important and urgent. here we must show ability to take action, and i shall return to this at the end of my speech here today. some of the difficult considerations to be made concern when and how quickly central banks, governments and other public authorities around the world will withdraw the strong economic stimulus they have been providing during the crisis. now that the financial markets are more stable and the recovery in the economies has begun, it is time to move towards a more normal situation, not least with regard to monetary policy. we must make the transition from monetary policy during a crisis to monetary policy in an economic downturn. for the riksbank and many other central banks, the question of when to begin raising the policy rate, and how quickly, is a fairly difficult balancing act. i intend to begin by talking about the considerations behind our most recent policy rate decision and our forecast – the policy we consider necessary for inflation to be close to the target of 2 per cent, at the same time as providing support for production and employment. transition from crisis interest rate to monetary policy in an economic downturn at the most recent monetary policy meeting