Change in the functioning of payments infrastructures is to be a key enabler if such a result is to be obtained. The sector of wholesale payments is about to enter a crucial stage of consolidation due to the launch of TARGET 2 by central banks. A breakthrough is also necessary on the retail side: in the field of infrastructures this breakthrough should notably mean  BIS Review 49/2005  3  interoperability so that through increased competition, the market selects the best infrastructures for the SEPA. Thank you for your attention. 4  BIS Review 49/2005
There could be sound reasons for this, although opinion is divided on the matter. Let us examine Iceland’s current interest rates more closely, ignoring for the moment the problems associated with pursuing independent monetary policy in small, open economies with unrestricted capital flows, which I will mention later. Let us also assume that inflation expectations remain at target, as they are at present. The question of whether or not a nominal policy rate of 5.25% is appropriate then centres on what is considered to be the equilibrium real policy rate; i.e., the interest rate that would keep inflation at target when the economy is in balance. With inflation expectations at 2½%, the real policy rate is currently just over 2½%. Before the financial crisis, the equilibrium policy rate was estimated to be quite a bit higher. As is the case elsewhere, it has probably fallen in the wake of the crisis. Furthermore, recent success in monetary policy may mean that we do not need as high an interest rate as before to keep inflation at target. We do not know how much the equilibrium rate has fallen, although the subject has been under close scrutiny within the Bank and has been discussed repeatedly at Monetary Policy Committee meetings. The newest research on the assessment of the equilibrium real rate will be presented at a seminar held at the Central Bank on 29 November. Perhaps there will be scope in the future to lower the short-term real rate as measured by inflation expectations somewhat further.