We should continue to develop flexible inflation targeting So, what conclusions should one draw from developments in recent years? How much do we need to reconsider and how much must we modify the monetary policy framework? I would reply: Somewhat, but perhaps less than one sometimes might think. I am fairly convinced that the flexible inflation-targeting policy conducted in many parts of the world has essentially been the right path to take, although it has not solved all of the problems. It appears to solve the problems it is intended to solve, without any serious side effects. I think that it is difficult, particularly with regard to Sweden, to overestimate the role played by inflation targeting in attaining better macroeconomic stability – together, of course, with farreaching changes especially in the fiscal policy area. Economic policy is now more disciplined and we were able to benefit from the stability and credibility this has provided in the most recent crisis. But it is also clear that the financial crisis highlighted some weaknesses and that the work on further developing the inflation-targeting policy must continue, both in the academic field and in central banks. For example, it is evident that there is reason to try to get to grips with and model the interaction between financial markets and the macro economy in a better way than before. Financial factors, and in particular credits and indebtedness, should play a larger role than before in our models and our thinking.
The foundation is the development in Hong Kong of multi-currency clearing and settlement systems operated on a real-time gross-settlement basis: so far we have systems for the US dollar, the euro, and the renminbi, in addition to the Hong Kong dollar; there is the possibility of replicating this for any number of currencies, should the demand arise. To make these systems available in Asian time to the rest of the region, we are progressively linking them to other cities in China and with other countries in the region: we established a link with Malaysia in 2006 and have agreed with Bank Indonesia to establish a similar link with Indonesia in 2010. I have no doubt that other links will follow. In addition, through our Regional CHATS service launched in July 2007, we have made available Hong Kong’s own clearing and settlement services throughout the region and beyond for cross-border payments. By June this year, 30 banks in Hong Kong had registered as service providers for services covering over 2,000 payment beneficiary points in 42 economies. BIS Review 93/2009  1  These are examples of how we are helping to build the hardware, or – to use the transport comparison – laying down the roads, tracks, junctions and interchanges, for regional financial markets. For the software and the actual traffic, it is of course the case that in a free-market economy such as Hong Kong's there is a limit to how much the government should take the lead.