Steps were taken in order to remove distortions in the Turkish economy, to renew the financial system and to change the dynamics of the economy with the purpose of achieving price stability, sustainable public finances and sustainable growth in the long run. First of all, right after the 2001 crisis, economic policies aimed, in the short run, at maintaining financial stability and convincing market participants that sound macroeconomic policies would be put into practice with determination in order to solve the problems of the economy. In my opinion, the most critical change that came after the 2001 crisis was the amendment to the Central Bank Law. The Central Bank of Turkey has been given independence after a period of 30 years of high and chronic inflation. The primary objective of the Bank is now defined as achieving and maintaining price stability. It was a turning point in the economy and highly contributed to the changing dynamics in the Turkish financial system. In addition, it is now explicitly indicated in its law that financial stability is the Central Bank’s auxiliary objective, and the Bank gives utmost importance to maintain it. In the fourth article of the Law, the Bank’s responsibility of financial stability is defined within the framework of the functions of central banks that I mentioned before.
At the same time, productivity in Sweden has not increased as quickly as in other countries. The development of unit labour costs reflects the difference between wage increases and growth in productivity. Unit labour costs, measured in the respective currencies, are shown in the column on the far right of the table. Sweden is here on the same level as Germany, but higher than the euro area as a whole and also higher than the OECD aggregate. Inflation towards the target – in an orderly manner Let me round off. One main purpose of my speech is to show how important the inflation target has been as a benchmark for price-setting and wage formation in Sweden. It is an important task for the Riksbank to create confidence in the inflation target. This is why we are worried over the current low inflation rate. The Riksbank wishes to safeguard the inflation target. We can do this by formulating monetary policy so that the current low inflation rate rises towards the target. During the spring we have therefore cut the policy rate further on two occasions and moreover decided to buy government bonds. We are prepared to do more than this if it proves necessary. At the same time, it is important that the journey back towards the inflation target is a smooth one and does not pose any threat to production and employment. We are now on the verge of very extensive wage bargaining rounds.