To avoid ending up in a such a dilemma in future, we can decide to take into account inflation developments after the target horizon. From what I have said until now, it is evident that our monetary policy decisions are normally based on the main rule that says that we should aim at keeping CPI inflation at two per cent 1-2 years in the future. However, on every occasion when decisions are made, we must consider how to relate to the guidance provided by this simple decision-making rule. This assessment is based on the extent to which the main rule leads to unacceptable macroeconomic costs in the form of fluctuations in employment and output. However, departures from the rule must not damage credibility in the inflation target or lead to inflation expectations being affected. As we have gained experience and increased our knowledge, we have clarified how we intend to apply our decision-making rule. We will in all probability, continue to obtain new insights and be confronted by unexpected events. This means that we must continuously evaluate and review our strategies. Independence requires openness A very important part of our strategy, which I have not taken up before, is openness and transparency as to how monetary policy is conducted. This part can hardly be reconsidered. The Riksbank’s independence creates good conditions for achieving and maintaining credibility for the price stability target.
It may well be in the interest of the candidate countries to make this period as short as possible. Sixth, it is true that any country entering the EMU need to fix the exchange rate. One should not take for granted, however, that the longer the period of the intermediate regime the better, as it is not always true that longer wait produces more information about the proper rate of exchange. It may produce just more noise. Seventh, both further efficient disinflation and strengthening long-term economic growth require completion of certain structural reforms in the candidate countries. There is no way around it. In case of Poland, the liberalization of the labour market and increased participation rate is badly needed. Fiscal reforms must concentrate on rationalising the spending and not just increasing taxes. Privatisation needs to be completed and it should include the banking sector. We have to strengthen competition in fuel and energy sectors. Legal framework needs to be adjusted to be more efficient. The earlier deadline of the entry to the EU could act as a powerful motivating device to complete those reforms. I am a great believer in the deadlines and I think they help to achieve success. Delaying the entry could do more harm then good, as it could weaken the incentive to complete the necessary and often politically costly reforms. Eighth, flexibility of the rate of exchange is a poor substitute for structural reforms.