10 A basic idea appears to be that underlying structural trends such as globalisation and digitisation comprise such strong adverse winds with regard to bringing up inflation that it is not worth trying. Instead of aiming to bring up inflation to 2 per cent, which will be difficult and risks causing other problems, one should therefore lower the inflation target, the argument goes. Digitisation and globalisation can affect inflation… It appears reasonable to assume that digitisation – defined as the digital technological developments and its spread to various areas of usage in the economy – will on the whole have a dampening effect on inflation, as it is usually measured. 11 Perhaps the most obvious and direct channel is price developments on certain products in the CPI’s basket of goods, which is affected by the production costs of these products showing a falling trend due to technological advances making advanced electronic components increasingly cheap. This applies, for instance, to mobile phones and computers. This is a development that has been going on for a long time and it may well continue for some time to come. 12  8  Stein (2013). 9  See, for instance, Mitelman (2013) and Schück (2015). 10  For instance, there appears to be a debate in New Zealand on whether the Reserve Bank of New Zealand’s attempts to attain the inflation target of 2 per cent risk overheating the economy, see the New Zealand Herald (2015).
7  In terms of communication, however, there may be some differences that are significant in practice. BIS central bankers’ speeches  3  on the risks one wishes to counteract. A monetary policy that leans against the wind therefore gives little “benefit”, while the “cost” in the form of poorer price stability and macroeconomic stability is high. On the other side of the debate it has been pointed out that it is not necessarily a disadvantage that monetary policy is blunt, in the sense that it has a broad impact on the economy, as it then “gets in all of the cracks” and is difficult to circumvent. 8 What the benefits and costs of using monetary policy to counteract financial imbalances will be is also an empirical question. Here, as well, the problem is that the practical experiences of a monetary policy that leans against the wind are still limited. Should the level of the inflation target be changed? Another question being discussed is whether the level of the central banks’ inflation targets should be changed. The debate since the financial crisis has primarily concerned whether the target should be raised, but most recently there have also been arguments for lowering the target. Should central banks lower their inflation targets? It appears to be mainly in the debate in Sweden that arguments in favour of lowering the target have been put forward recently. 9 But they have also arisen in other countries to some extent.