we saw signs of problems in the us housing market. the unrest increased when it was revealed at the beginning of august that several financial institutions had made significant losses in connection with the us sub - prime market. the background to this was that the number of households experiencing difficulties in paying their mortgages had gradually increased. it was also difficult to assess to what extent the different market agents were exposed to the assets concerned – in which balance sheets the credit risks had ended up. this was the starting point for a more general reassessment of risk in the financial markets. to make a long story short, one can say that the general uncertainty led to an increasing demand for safe assets such as treasuries. government bond rates have fallen, while rates on some other investments have been pushed up. this is probably because risk premiums have increased, after being very low for a long period of time. for instance, interest rates on loans and deposits between banks, interbank rates, have risen in many countries. for instance, the european central bank ( ecb ) and the federal reserve have seen a need to supply extra liquidity to slow down the rise in interbank rates. in the united kingdom, the bank of england has chosen to use its position as lender of last resort and to grant emergency liquidity assistance to a mortgage institution, northern rock. emergency liquidity assistance is only given if the institution in question is assessed to be solvent but lacking sufficient liquid funds. … and here at home sweden has also been affected by the turbulence in the financial markets, albeit to a much lesser extent than, for instance, the united kingdom, germany and the united states. the fact that sweden has been affected despite not being, as it were, involved in the problems that started the unrest is not so remarkable. we are a part of the global financial system and not an isolated northern outpost. the riksbank governs the short - term rate that applies for one day, the so - called overnight rate, and this has remained stable around the repo rate. in brief, the riksbank ’ s method of steering interest rates has worked well. but the interbank rates with slightly longer durations have risen, although not as much as in some parts of the world. this is primarily a question of different effects from the uncertainty in the financial markets, such as rising risk premiums. on the whole, the swedish financial system and the interbank market have nevertheless functioned well. what is the

stefan ingves : monetary policy, openness and financial markets speech by mr stefan ingves, governor of the sveriges riksbank, at skandinaviska enskilda banken, stockholm, 24 september 2007. * * * " say as little as possible and say it cryptically ". 1 this type of communication strategy is probably quite unthinkable for most central banks today. but this is how us professor of economics alan blinder describes central bank communications not so long ago. and i believe that this description is a pretty good one of how things actually worked, say 15 to 20 years ago. i would also guess that those of you here this evening who either monitored or worked in the financial sector at that time would agree with me. but since the beginning of the 1990s the riksbank as well as most other central banks has taken considerable steps towards greater openness and clarity – both with regard to what we are trying to achieve and how we are going about it. constantly working towards more efficient communication has been high on the riksbank ’ s priorities list ever since the inflation target was introduced. but the pace of this work has varied as conditions for monetary policy and demands on the central bank have changed. so sometimes we have had fairly long periods without any major changes in our methods of communication, sometimes we have made many changes in a fairly short period of time. particularly over the past two years we have made a number of changes and this has led to some debate. this often happens in times of change, particularly if it requires a learning process – for all those involved – before everything falls into place. and this is also the case with the changes in the riksbank ’ s communication. it is therefore quite natural that some questions have arisen : why has the riksbank made these changes? haven ’ t you made things unnecessarily complicated – tried to “ fix something that isn ’ t broken ”? have you even gone too far in your openness? these are important questions that i shall try to answer here tonight. giving the right information at the right time and in the right way is particularly important in times of unease. there has recently been unrest in the financial markets around the world. sweden has not been affected by the market turbulence to the same extent as several other countries. i would nevertheless like to take the opportunity to say a few words about our views on what is happening right now and on the riksbank's