But please remember that this should not be interpreted to mean that I have a different opinion of the Riksbank’s objectives. I consider it a good thing to conduct an open discussion on the policy pursued. And I hope that you intend to take part in this discussion, as the whole point of an open central bank is to facilitate such discussion and allow it to improve monetary policy. Riksbank focuses on total inflation picture I shall begin by describing the way the Riksbank works. The Riksdag has assigned two main objectives to the Riksbank: to maintain price stability and to promote a safe and efficient payment system. Today I shall concentrate on the first of these two objectives. The Riksbank has defined the target for monetary policy as to limit inflation to 2 per cent, with a tolerated deviation interval of plus/minus one percentage point. This tolerated interval indicates that deviations are likely, but that they will be limited. The objective is worded in terms of the consumer price index (CPI), which is a broad index consisting of the prices in a basket of goods and services consumed by an average Swedish household. As interest costs and indirect taxes included in CPI inflation are not assessed to have a long-term effect on inflation, the Riksbank has chosen to normally focus on UND1X, which is an index that excludes these factors. From time to time there may also be reason to disregard other price changes that are assessed as temporary.
If I had to choose a motto for a central banker, I think “better safe than sorry” would be very high on the list! More importantly we collectively showed that the London markets were equal to the challenge - even a once-in-a-millennium challenge - and were determined to make sure that come the first day of the new year London would be “open for business as usual”. What of the coming year? Well, I can predict that, after two years of new year working, we will all be able to enjoy our New Year’s Day bank holiday for a change next year! But beyond that, my crystal ball is no better than yours, and I am afraid that if you are looking for me to predict the course of exchange rates or interest rates over the next 12 months I am going to disappoint you. I would like instead to pick out a few themes which I think will be of increasing importance as the year unfolds. Firstly, I think we will increasingly see a fall in the absolute size of government bond markets, although once again Japan remains the exception. This is already happening here in the UK and in the US, as fiscal surpluses reduce bond issuance, and as the recovery in the rest of Europe continues budgets will increasingly move towards balance there too.