This may sound obvious, but let us play with the idea that we didn’t publish our forecasts, as not all central banks do so. Then it would not have been possible to evaluate and discuss our forecasts or the basis for our decisions. In other words, openness is a necessary condition for a worthwhile debate on monetary policy. Until fairly recently, the Riksbank’s inflation forecasts were based on an assumption that the repo rate would remain constant throughout the forecast period. The inflation forecasts are now instead based on an assumption that the repo rate will develop in line with expectations in the financial markets 3 . The interest rate assumptions on which the forecasts are based thus become more realistic. It has also made it easier for us to relate to the entire interest rate path when communicating monetary policy rather than keeping to the most recent decision. This is a step towards greater openness. It is important that the Riksbank should say how inflation should be brought back to the target. In the debate on monetary policy it is good to have greater focus on interest rate policy in the slightly longer term rather than on the current interest rate decision. This leads to a better discussion of the considerations with which monetary policy is normally faced.
A new liquidity regulation is currently in the test and calibration phase. This regulation takes into account all balance-sheet and off-balance-sheet items that are of relevance in liquidity considerations, and is based – as far as possible – on internal bank liquidity management principles. It makes the big banks more resilient to disturbances in the interbank market or larger-scale withdrawals of deposits. It promotes longer-term financing as well as higher-rated securities that are capable of generating liquidity even in a stressed market environment. The new regulation is due to come into force in the second quarter of 2010. These advances and the broad consensus achieved at the international level can certainly be regarded as positive achievements. However, so far they only apply to preventative measures. As mentioned previously, these measures serve to reduce the probability of a crisis, but cannot always prevent its occurrence. Another crisis is inevitable and we must be prepared for it. 3. Resolution measures needed; “too big to fail” is biggest challenge  Consequently, we need tools that will substantially reduce the costs of a crisis. The legacy of the current crisis is a banking system with large international institutions that now enjoy a virtual state guarantee. The fact that systemically important banks enjoy such a guarantee is now openly recognised to be a problem by the banking sector, too. A guarantee of this kind contradicts the basic principle of the market economy and presents us with a situation that cannot be tolerated.