Not only did he point to the importance of maintaining price stability, but he also gave the interest rate responsibility for doing so. When we today refer to a normal or neutral rate of interest, Wicksell is an obvious reference. In 1907, he wrote the following about the relationship between the interest rate and inflation: “… the problem of keeping the value of money steady, the average level of money prices at a constant height, which evidently is to be regarded as the fundamental problem of monetary science, would be solvable (…) by a proper manipulation of general bank rates, lowering them when prices are getting low, and raising them when prices are getting high”.6 Wicksell’s proposal to establish a Scandinavian central bank was never realised. Wicksell himself entered into a union with a Norwegian woman, Anna Bugge. As the story goes, she strongly urged him to complete his academic works, rather than devoting his time to writing for newspapers and popular oratory. She was active in the peace and women’s movement and was Sweden’s first female diplomat. The union between the two did not consist of a formal marriage as Wicksell refused to enter into a contract which at that time would have made him her guardian. It was a contractual form of cohabitation based on mutual trust and respect, perhaps not unlike the cohabitation that Norway and Sweden have enjoyed on the Scandinavian peninsula over the past 100 years. But that is another story.
Factors which could potentially accelerate the return of inflation back to the target include a higher wage growth than assumed in the projection, provided it would not be accompanied by  11  National Bank of Poland “Financial Stability Review Report”, Warsaw, September 2005  12  National Bank of Poland “Financial System Development in Poland 2004”, Warsaw, November 2005  13  H. Koskenkylä, Ed. “Finnish Financial Markets 2002”, Bank of Finland, 2003  14  Monetary Policy Committee statement, 26 April 2006  BIS Review 61/2006  3  sufficiently fast increase of productivity, further oil price hikes or a deterioration of the public finance situation in relation to that envisaged in the Convergence Programme. The Council maintains its belief that the most favourable scenario for Poland would be to implement an economic strategy focused on creating conditions which would ensure the introduction of the euro at the earliest possible date, which would be conducive to a higher long-term economic growth.”, end quote. Public finances prospects This brings me to the developments in public finances. The fiscal outlook over the medium-term future would be broadly positive, if it were not for substantial risks, mainly political, surrounding the deficit path. In 2005, Poland recorded an ESA’95 deficit of 2.5% of GDP.