Given this, it does not appear entirely unnatural for fiscal policy to support monetary policy in exceptional circumstances with regard to maintaining confidence in the inflation target – and thereby ensuring that the central bank's policy rate can continue to be an effective tool in the future. Conditioning of monetary policy a possible route? An area that we as central bank have control over, and where we could possibly become more effective, is our communication of future monetary policy. Although we have been publishing a forecast for the repo rate for many years now,  10 For a more detailed discussion of the Riksbank’s monetary policy toolbox, see Ingves (2020). 11 Moreover, ideas have recently been put forward with regard to fiscal policy being a more effective stabilisation  policy tool than monetary policy in some situations, in that fiscal policy measures can more directly target individual sectors of the economy where the problems are greatest, see Woodford (2020). 12 See, for example, Sims (2016). This idea has also been put forward earlier in the Swedish debate, see Borg (2003). 7 [15]  we have to acknowledge that our forecasts during the past decade have systematically overestimated how quickly the interest rate can be raised. We have not been alone in this overestimation – the market forecasts have looked fairly similar (Figure 6). They were better than the Riksbank's during the period 2011-2013, but the pattern is essentially the same – substantial overestimates and inaccurate forecasts.
The problem that loomed around this time a year ago is a thing of the past and terms in the secondary market are more favourable again. The Central Bank underlines that global market conditions can take a sudden turn for the worse and it is important to be on the alert and prepared for such a contingency. The current episode of ample liquidity and lower interest rates which has been ideal for risk-seeking investors may change unexpectedly. Short-term interest rates have been rising in most markets recently and capital costs are no longer so favourable. The Icelandic banks are better equipped for such a reversal than a year ago, because experience has taught them to extend and disperse their borrowing, and build up substantial liquid reserves in foreign currency. In 2006 the spotlight was on the banks’ liquidity risk. Now that this risk has ebbed, the focus has shifted to credit risk and the potential impact of higher interest rates and a depreciation of the króna. Amidst the turbulence of 2006, the banks slowed down their credit growth and expansion of their balance sheets. No major foreign financial companies were acquired and equity exposures were reduced. Nonetheless, it is natural to consider their credit risk and vulnerability towards a fall in asset prices. Icelandic households’ debts with credit institutions have soared in recent years, especially averageincome and young households.