Basically, there is now a broad consensus that low inflation is good for economic development and accordingly contributes to gains in prosperity. While it is true that in certain situations the economy can be stimulated by means of low interest rates, this works only if there are unutilised resources. Taken too far, it is liable to result in bottlenecks that push prices and wages up. There is then a risk of households and firms gradually starting to act in the belief that inflation will continue to be high — inflation expectations become firmly fixed on this. In other words, in the long run monetary policy is not capable of influencing growth. What does underlie a country’s economic development and thereby its prosperity are such factors as the labour force, a willingness to invest and technical progress. The best the Riksbank can do is promote an economic development that is more stable, with smaller fluctuations around the long-term trend. It therefore seems to me that the economic debate is somewhat lopsided. The long-term issues you work on in the Riksdag (Sweden’s parliament) ought to attract more attention. The Riksbank’s doings get more than their fair share. Convincing people in Sweden about the value of low inflation really should not be difficult. After all, what did we get out of letting inflation take off in the 1970s and ’80s? Recurrent devaluation cycles and a level of prosperity today that is considerably below that in many other countries.
Ardian Fullani: Brief overview of key topics and the appropriate macroeconomic policy response Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the joint press conference of the International Monetary Fund (IMF) mission with the Ministry of Finance and the Bank of Albania, Tirana, 3 November 2010. *  *  *  Dear Mr. Minister, Dear Mr. Bell, Dear media representatives, It is a pleasure for me to appear before you today following a week of intensive and fruitful discussions to present the Bank of Albania’s position. Allow me first to underline that the meetings held broadly confirmed the conclusions provided in our last monetary policy report and the Bank of Albania’s outlook regarding its future performance. In what follows I will provide a brief overview of our opinions, dwelling upon the key topics of discussion: current and expected economic developments; risks and related concerns, and; the appropriate macroeconomic policy response. The Albanian economy had a positive performance in the first nine months of 2010, expressed in positive growth rates and improved key parameters of macroeconomic stability. In turn, the recovery has been reflected in contained and downward inflation rates, improved current account deficit, lower budget deficit and relative sustainability of public debt figures. These developments contributed to fully restoring confidence in the banking system, lowering the interest rates and the risk premiums, enhancing the exchange rate sustainability and improving the liquidity and financial sector’s balance sheet indicators.