When the new Executive Board of the Riksbank took office at the beginning of 1999, we found no reason to change the target formulation. To make it possible to evaluate how we carry out our task, we endeavour to be as clear as possible about the grounds on which monetary policy decisions are made. Inflation assessments and interest rate decisions are explained in the Riksbank’s inflation reports. The Riksbank has also stated a rule of conduct for what should normally lead to decisions on interest rate rises, and the justifications for departures from this rule of conduct. Finally, the published minutes of the Executive Board’s monetary policy meetings contain an account of how we voted and the reasoning underlying the decisions. Resource use is important for inflation Since the interest rate affects inflation with a time lag, monetary policy decisions are based on forward-looking assessment of inflation. Highly simplified, the conceptual framework, used by the Riksbank in the appraisals of price tendencies, can be described as follows: when there is unused capacity in the economy, price pressure is low and inflation is under the target. When demand is sufficiently high to lead to output exceeding the level that coincides with the long-term trend level of production, inflation instead tends to exceed the target. Inflation will be on target when output is at the level of the long-term trend level of production - the output gap is closed. This reasoning assumes that inflation expectations are close to the target for monetary policy.
In order to remain relevant and effective in meeting the growing financial needs of an expanding economy, DFIs need to increasingly draw funds from alternative sources, such as the capital market. Sourcing funds directly from the market would also help instil certain form of discipline on the operations of the DFIs. Allow me this opportunity to now share with you an overview on the roles and developments of DFIs in Malaysia. There are currently 14 DFIs in Malaysia. Like those found in other countries, the DFIs were established and funded by the Government to develop and promote identified strategic sectors, in line with the overall industrialisation and economic development objectives of Malaysia. The first DFI was the Malaysian Industrial Development Finance Berhad (MIDF), which was established in 1960, to provide medium to long-term financing to promote the development of private industrial enterprises. Subsequently, several major DFIs were established, including Bank Pertanian Malaysia (or the Agriculture Bank of Malaysia) to promote agricultural development, Bank Pembangunan Malaysia Berhad (or the Development Bank of Malaysia) to promote Bumiputera indigenous community development in commerce and industry, Bank Industri Malaysia Berhad (or the Industrial Bank of Malaysia) to support development in the industrial and manufacturing sectors, as well as the Export-Import Bank of Malaysia (EXIM Bank) and the Malaysia Export Credit Insurance Berhad (MECIB) to promote international trade and support export diversification and expansion, especially to the non-traditional markets.