Clarity and openness were guiding principles for the inflation-targeting regime right from the start, and I believe that this has played an important part in building up confidence in the inflation target. This culture has therefore continued to permeate the Riksbank’s activities. It is also important so that the Riksdag, which is our principal, can evaluate the Bank and require accountability from us. This motive became particularly important when the new wording of the Sveriges Riksbank Act gave the Riksbank an Executive Board with an independent position in 1999. Why 2 per cent? The new wording of the Sveriges Riksbank Act applying from 1999 changed the objective for the Riksbank’s activities to maintaining price stability. The previous Act contained a more general formulation that the Riksbank was responsible for “foreign exchange and credit policies”. When the new wording was produced, it was pointed out in the preliminary work that in principle the Act could be very detailed with regard to the target for inflation and so on. But the legislators judged that this type of precision would not be sufficiently flexible and allow the Riksbank enough scope to adjust the target to different circumstances. This raises the question of what price stability actually is and of whether 2 per cent inflation is the best target for the Riksbank. If one turns to academic literature on this subject, one will not find any clear answers. Everyone agrees that high inflation is detrimental to the economy.
Benefits range from a consistent and standardised application of rules and processes, to seamlessly harnessing the individual institution’s respective infrastructure and promotional activities to realise cost savings arising from the sharing of scarce capital. In the quest for efficiency in the payment systems of the nation, an essential task for the banking industry is thus to strengthen the focus on meeting the specific demands of the consumers, and at the same time, forging alliances in common infrastructure building. The FPX is a right step forward in this direction. The efficiency of the financial system will be further enhanced with the FPX that reduces transaction costs and contributes to the overall functioning of the economy. This advancement forward can only be successfully achieved when there is active participation by the banking institutions, individuals as well as businesses, in utilising and promoting the system nation-wide. Bank Negara Malaysia strongly encourages all banking institutions and users to participate in the FPX to exploit its full potential, a process that would contribute towards the competitive positioning of the Malaysian economy. Ladies and Gentlemen, Economic expansion hinges on the effective intermediation function of the financial system, and the efficiency of funds flow is integral to the overall functioning of the system. To gain significance as a trading nation, the strengthening of commercial facilities, including e-commerce, is pivotal to the process.