surrounded by a symmetrical interval. previously, the ecb ’ s target was for inflation to be below 2 per cent. it was at the ecb governing council ’ s evaluation of its monetary policy strategy in may this year that the target of keeping inflation close to 2 per cent was specified. with this, the ecb has become more precise in its definition. compared with the riksbank, the difference in target level is small and should not make any great difference in practice. the most significant difference in target definition is that the ecb ’ s target relates to inflation for the euro area as a whole, while the riksbank ’ s target applies of course to sweden only. the ecb ’ s policy implies therefore that the rate of inflation in individual member states can be both higher and lower than 2 per cent without constituting neglect of the ecb ’ s target. this is also the case in reality, as shown clearly by the inflation outcomes that have been measured. the same applies to sweden but on a smaller scale ; inflation can be different in norrbotten and skane. when formulating monetary policy, the ecb attaches special importance to monetary aggregate and credit variables. a reference value for the annual increase in the monetary aggregate has been set, currently amounting to 4. 5 per cent. in general, however, the interest rate adjustments implemented by the ecb have not been justified on the basis of developments in the monetary aggregate. this has been clear on several occasions in recent years, when the refi rate has been lowered in spite of the fact that the rate of increase in the monetary aggregate clearly exceeded the reference value. the evaluation of the strategy in may also resulted in measures of the monetary aggregate being given a role primarily as indicators of future inflation. naturally, the riksbank also follows monetary aggregate and credit variables, even if we have not assigned them special significance when assessing inflation. therefore, the formulation of policy nowadays is also quite similar in this respect as well. finally, allow me to point out that despite the similarities in the formulation of policy, it can not be ruled out that price and wage increases in sweden may sometimes be both too high and too low. the main reason is that the ecb ’ s policy is targeted at average price increases in the euro area as a whole. partly as a result of this, there is reason to discuss both the role of fiscal policy and the functioning of the labour market in the event of an introduction of the

later. participation in erm2 one important question that would become relevant during the preparatory phase is how best to ensure exchange rate stability against the euro within the scope of the exchange rate mechanism erm2, the successor to the erm system. in this regard, there may be reason to say something about history. the riksbank has previously, mainly over the years 1995 - 1997, considered the issue of erm participation and the possibilities for combining this with the inflation target policy that has been conducted for a number of years. during that time, the riksbank was legally responsible for the exchange rate regime, and the reasons therefore for considering erm participation were quite simply to prevent the regime of floating exchange rates from constituting a formal obstacle to swedish participation in monetary union, in the event this was to become a possibility. when the government then decided that there was insufficient popular support for swedish participation in monetary union, the question of changing the exchange rate regime was dropped. in connection with the riksbank being made formally independent in 1999, new legislation on exchange rate policy was also introduced. nowadays, it is the government that decides upon the issue of our exchange rate regime, although the riksbank determines how it is to be implemented. in other words, it is the government that would decide whether and when the krona should join the exchange rate mechanism erm2. following that, the ministry of finance and the riksbank would decide what rate between the krona and euro we assess to be consistent with a stable development of the economy. there are very good reasons to agree upon a common line of action. this is why we are holding discussions already among toplevel officials about an appropriate line of reasoning, the results produced by different estimation methods, etc. if we do not reach agreement, it is likely to be difficult to hold effective discussions with our european partners. a decision on participation in erm2 and on the central rate and fluctuation bands at which the krona should join would be taken through common accord of the finance ministers in the euro area member states, the ecb, the central bank governors and finance ministers of the applicant country and the other erm2 countries, i. e. denmark at present. in practice, a decision would be preceded by contacts between representatives of the ministry of finance and the riksbank as well as with our colleagues in a number of euro area member states and denmark. the first official step in the negotiations would be taken within