This is how the Riksbank formulated the inflation target when it was announced in 1993. One can say that the task of ensuring that prices remain stable has been delegated by the Swedish people through the Riksdag (Swedish parliament) to the Riksbank. And this is actually not merely an objective, it is also a means. By keeping inflation low and stable, monetary policy is to help to create the best possible conditions for good and sustainable economic growth. Delegating monetary policy to the central bank in the way the Riksdag has done in Sweden also reduces the risk of political pressures, short-sighted actions and rapid changes in monetary policy. Our focus – what governs our interest rate decisions – is on attaining the inflation target within a couple of years in a way that provides the most balanced development of the economy possible. This was also the case at our most recent monetary policy meeting in September, when the repo rate was raised to 4.75 per cent. It was a difficult situation in which to make a decision, with high inflation both in Sweden and abroad at the outset and a very uncertain world economy. Although we Executive Board members agreed on many things, our assessments differed with regard to the interest rate path needed to bring inflation back on target at a suitable pace. Although the differences in our assessments were actually fairly modest, it is extremely important to be clear about both the common and individual motives behind the stances taken at the meeting.
In Sweden, the Riksbank has regularly highlighted many of the risks in the financial system. We did so most recently in our Financial Stability Report. There we pointed out, for instance, that the financial turbulence might worsen and that the banks' access to funding could deteriorate. At the same time, we have all along made the assessment that financial stability in Sweden has been satisfactory. We make the same assessment now, and the Swedish banks are financially strong. 2  BIS Review 115/2008  As we have seen, a lot has happened on the financial markets recently. We are following developments closely, constantly updating our analyses and we are prepared to take action if necessary. We have regular contacts with banks, market participants and other government agencies, as well as our central bank colleagues in other countries. There is a generally high level of uncertainty in the world economy at present and this will probably persist for a good while to come. I would therefore like to return now to what I mentioned at the beginning – the inflation target and the stability it offers to the economy, particularly when storms are raging all around us. Monetary policy – focus on the inflation target The objective of monetary policy is to maintain price stability and this has been established by law since 1999. To be more precise, inflation measured in terms of the consumer price index, CPI, is to be held at 2 per cent, with a tolerance interval of +/- 1 percentage point.