In Sweden CPI inflation has fallen from around 5 per cent in 1994 to approximately 2 per cent in 2003. Even in a more long-term perspective, inflation shows a downward trend, which is illustrated in a figure showing inflation in OECD countries. Other parts of the world have experienced a similar development. The IMF’s previous chief economist Ken Rogoff has demonstrated in an article that global inflation has fallen from 30 per cent to 4 per cent between 1993 and 2002. Which factors could lie behind this remarkable slowdown in the rate of price increase? I believe that it is mainly a combination of three factors: (1)  A change in monetary policy with independent central banks applying inflation-targeting,  (2)  IT investments enabling large-scale cost savings and  (3)  Globalisation that entails, among other things, increased competition from new low-wage countries and pressurises producer countries towards greater productivity. 1. Independent central banks with inflation targets  At the beginning of the 1990s, in the aftermath of the years of overheating and crisis, a process of reorientation of economic policy began in Sweden: the tax system was reformed and combating inflation was given priority. The Riksbank decided at the beginning of 1993 to introduce an inflation  BIS Review 21/2004  1  target, defined as 2 per cent with a tolerated deviation interval of plus/minus one percentage point, and fiscal policy was increasingly oriented towards budget consolidation. Similar developments took place at around the same time in many other countries.
Monetary policy: achievements and review? Már Guðmundsson, Governor of the Central Bank of Iceland. Monetary policy meeting of the Iceland Chamber of Commerce, held at Harpa in Reykjavík on 17 November 2016  Madame Chairman, honoured guests, The Iceland Chamber of Commerce has a long-standing tradition of holding a meeting like this one on economic developments and prospects and monetary policy. The meeting is held following the publication of the Central Bank’s autumn forecast and, in latter years, the Monetary Policy Committee’s interest rate decision. In recent years, it has been the practice to select a particular topic for the meeting, and in keeping with this, today’s topic is: Is independent monetary policy too costly? This departs somewhat from the contents of the Central Bank’s Monetary Bulletin and current tasks of monetary policy, but I will touch on these towards the end of my speech today. Yesterday the Bank published Monetary Bulletin 2016/4, which contained the Bank’s new macroeconomic forecast, and announced the Monetary Policy Committee’s interest rate decision. The big picture of the current state of the economy is that things have seldom been better. Icelanders have received a significant boost from improved terms of trade and growing goods and services exports, particularly due to strong growth in the tourism sector. It is this that underlies the vast increase in Icelanders’ real income and the country’s high employment level. In addition, Icelanders have proven more cautious this time than often before during an economic boom.