should have electronic trading. all business is settles, whether this is done through a traditional market - maker system or by electronic trading. those buying fixed income instruments want to be sure of receiving what they have bought an those selling want to receive the money they have been promised, regardless of the trading form. on the other hand, it is clear that it would be desirable to take the opportunity to design a new system that would provide a good means of handling settlements. this is particularly important as the increased volumes hoped for, which are the whole point of the new system, will create increased risks in terms of settlement. today settlement on the fixed income market is done by means of net settlement in vpc. this works well in many ways and the routines are perceived as manageable by the market players, as far as i understand it. however, the system is nevertheless obsolete and involves risks. if one of the parties involved failed to meet its payments during the daily settlement, for instance, if one party was forced to make a suspension of payments or simply lacked sufficient liquidity, the situation could become troublesome. the existing routines can be called into question. one can imagine situations where settlement is not achieved, which could have consequences for the liquidity of the banking system. from the point of view of financial stability, this is an unsatisfactory situation. the requirement normally made of a settlement system is that settlement can be achieved even if the largest party should fail. this requirement is not met in sweden and the security in the swedish payment system would not be regarded as satisfactory in an international evaluation. vpc's owners, i. e. the banks, undertook to remedy this problem when they purchased vpc from the government. that was in spring 1999, and as far as i know nothing has yet been done. common to all methods, unfortunately, is that they cost a lot of money to implement and this money has to come from the market players in some way. however, it should be in the interests of the market players that something is done. in the long run, it is unlikely that the banks'international counterparties will accept that settlement in sweden is done through systems that are inferior to those in the rest of europe, and with questionable security. it is reasonable that we should live up to the international standards now being established. it would be a defeat for the market if the government had to enforce solutions in this field through legislation. starting point for a renaissance these brief comments show that

kristina persson : monetary policy and the labour market speech by ms kristina persson, deputy governor of the sveriges riksbank, at lo region's annual general meeting, lo vastmanland, vasteras, 12 may 2006. the diagrams to the speech can be found on the website of the sveriges riksbank. * * * thank you for the invitation to participate in this lo region's annual general meeting! my speech will concern developments in the labour market and the significance of monetary policy for unemployment and employment. introduction there is a common fallacy that there is a tradeoff between inflation and unemployment ; that one can buy slightly lower unemployment at the cost of a higher inflation rate. i would argue instead that it is quite the reverse : stable prices provide a good foundation for the economy. low inflation reduces uncertainty for consumers and firms ; it becomes easier to predict the outcome of a decision to buy or sell and to compare different prices. economic agreements can be signed for longer periods, which reduce uncertainty. when people make better - informed decisions, the economy is more efficient. the task that the riksdag ( the swedish parliament ) and the government have given to the riksbank is to maintain price stability. the riksbank has then defined this statutory target as an inflation rate of 2 per cent ( measured as cpi inflation ) and with a margin of 1 percentage points. this means that the focus is on inflation when the executive board of the riksbank makes its monetary policy decision. however, this does not prevent giving consideration to the real economy – growth and employment – when this can be done without jeopardising the inflation target. this is also clearly stated in the preparatory work on the sveriges riksbank act. the riksbank uses the repo rate – the rate at which the banks can borrow or deposit funds in the riksbank - as its monetary policy instrument. when interest rates are low, demand is usually high households save less and companies invest more - which leads to a gradual increase in prices. the reverse applies when interest rates are high. however, the interest rate should not be higher than it needs to be to guarantee that the riksbank ’ s inflation target can be met. with hindsight, we can note that inflation was below target in 2004 - 2005 and that the interest rate was therefore too high. the main explanation for this is that productivity growth was higher than expected and international price developments were weaker. competition