Questions relating to the taxation system, corporate location and investment trends will be examined in this context. At the same time, it is clear that the weak exchange rate has periodically been of assistance during, for instance, the latter part of the 1990s, when strong export growth was able to compensate for weak domestic demand. However, there is also another side to this issue. An excessively weak krona is not good for the Swedish people’s standard of living. A few words about the Riksbank During the hearings at the Committee on Finance I do not usually speak of developments within the Riksbank. Today I intend to make an exception and report some developments to you, our owners. In the mid-1990s we who formed the management of the Riksbank, my predecessor Urban Bäckström, my successor Stefan Ingves and myself, set a course for the organisation based on a few fairly simple principles. We would endeavour to concentrate on the Bank’s core tasks; monetary policy and  2/7  financial stability. The emphasis would be on building up increased analytical capacity and competence within these areas. In addition, we would aim for greater openness, both internally and externally. These have been the guiding principles for our work over the past ten years. The changes that have been made are quite substantial. The number of employees at the Riksbank, including the Bank’s subsidiaries, has been reduced from over 1,200 to just over 400, which makes us one of the smallest central banks in Europe.
During the mid and late 1990s we did not cut the repo rate as much as our normal principles might have recommended, as our assessment was that some of the fall in prices was due to our own interest rate cuts, which subdued the housing cost component of CPI, and to deregulation that was partly of a temporary nature. In the same way, we did not react as much as we could have done when inflation rose sharply for transient reasons in 2001 and 2003. A more recent example is the decision in March 2005 not to cut the key rate. Our reasoning then was that it might have been possible with the inflation forecasts we had, but that the expected high growth, combined with elevated house prices, called for some caution. Our flexibility can also be said to include a preparedness to react to events where the final consequences are particularly difficult to survey. One such example is the acts of terrorism in the United States on 11 September 2001. In the wake of these attacks, many central banks around the world were quick to cut interest rates. This powerful response can be interpreted as a kind of "insurance" against a really poor outcome, rather than as the result of carefully-considered assessments of the most probable outcome. It would be desirable, for a better understanding of monetary policy, to develop the principles governing how our reasoning in practice weighs future inflation against real or financial stability.