Payments over the counter, cheques, cash withdrawals and paper-based giro transfers are expensive to produce. Electronic payments, such as direct debit, transfers via Internet banks and card payments are far cheaper to produce. It is not so surprising that in the past twenty years we have to a great extent switched from paper-based to electronic payments. 5 This is surely a trend that will continue. New developments in the market Everything I have spoken of here is essentially to do with what we can describe as traditional forms of legal tender. Even Internet payments are essentially traditional in the sense that money is transferred between accounts. During the 1990s there were many, not least within the central bank world, who believed that electronic money (e-money) would replace if not all, at least a large part of the smaller payments that are made with banknotes and coins. In somewhat simplified terms, one could say that e-money is money that has been transferred, for instance, from an account in a bank to some form of computerised medium, where it is stored and can then be used for payments. The storage space may be a microprocessor embedded in a plastic card – socalled smart card – but it may also be in the hard drive of a computer or a central server – so-called network money. In Sweden at present e-money is not issued nationwide. However, it has existed.
The projections for the key rate, inflation, output and other variables are based on our assessment of the economic situation and our perception of the functioning of the economy and monetary policy. If economic developments are broadly in line with our projections,  5  See Staff Memo 2008/3 from Norges Bank. BIS Review 37/2009  13  economic agents can expect that the interest rate path will also be approximately in line with that projected. On the other hand, the interest rate path may shift if the economic prospects change, or if the effect of interest rate changes on inflation, output and employment differs from that assumed. In the Monetary Policy Report, we present two alternative scenarios where demand is higher or lower than presented in the baseline scenario. The yellow lines in the chart illustrate a scenario where growth in private consumption is stronger than expected and the turnaround occurs more rapidly. In this scenario, interest rates may decrease to a lesser extent and move up more quickly. The red lines in the chart illustrate a scenario where the global downturn is deeper and more prolonged, with more pronounced effects than assumed. It will then be appropriate to set a lower interest rate in order to stimulate the economy and thereby prevent inflation from becoming too low. The primary effect of a key rate close to zero will probably come via a weaker krone. It will then be appropriate to consider instruments other than the interest rate.