Competition within Sweden has also sharpened, which has increased the need for greater efficiency in many sectors. For example, our assessment is that increased establishment of low-price supermarket chains contributed to a fall in food prices in 2005. Should the interest rate have been cut further? It is clear that structural changes in the economy have in many ways held down inflation and created scope to cut the repo rate to historically low levels (diagram 9). From time to time there has been criticism which says that we should have cut the repo rate even more. The fact that such a discussion arises when inflation is well below the target level is not in itself surprising. However, it is important to have realistic expectations as to what monetary policy can achieve. Changes of a structural nature are difficult to capture at an early stage of the forecasting work as it takes some time before it becomes clear that the changes are not merely transient factors. This is one reason that needs to be recognised why inflation may deviate from the target level. One indication of the difficulties in making accurate forecasts is that inflation in 2005 was overestimated by in principle all forecasters (diagram 10). A comparison indicates, if anything, that the Riksbank was among the first forecasters to take into account the effects that have subdued inflationary pressures. Some analysts have periodically advocated a somewhat faster rate for interest rate cuts than that chosen by the Riksbank. However, the difference has on average been small.
The lessons we derived from this experience will lead global decision makers to reconsider their policies. We have already started to observe critical and permanent changes in global financial order. The future of the financial system will be in a much better shape with a pre-emptive approach. The coordination is especially needed in terms of better regulation and supervision of financial market instruments. In order for the mission of the COMCEC and thus of the Organization of the Islamic Conference to be successful, it is necessary for the decision making mechanisms to acquire a more active and global dimension. The success of the economy policies of the Islamic counties under the roof of the COMCEC depends on the formation of measures to increase trust and establishment of a close cooperation in economic and commercial areas. Annual meetings of the Governors of the Central Banks of the COMCEC countries will be very important in terms of catching up with the world’s agenda and following the recent developments. Economic activities of the related countries will be supported the most by increasing the cooperation between the central banks of the COMCEC countries, enhancing the functioning of the active mechanisms of communication in international platforms and sharing the experiences. The recovery of the economies of the Islamic countries will be fastened by increasing the exchange of information in the fields of economy, finance and banking among the member and observer countries’ central banks and financial authorities.