The Riksbank has chosen to publish minutes of Executive Board meetings after an interval of 6–8 weeks; the minutes are to reflect the discussion and indicate how the members voted. The clearly independent status that has now been assigned to the Riksbank has much to do with this choice. The minutes make it easier for policy evaluators to follow the formation of monetary policy and assess the actions of Board members. This is a democratic interest. Moreover, the fact that the voting will be published probably increases the members’ motivation to form a personal opinion about the difficult matters that have to be considered. I also believe that access to the minutes can help people to understand the choices that have to be made in the formulation of monetary policy and demystify what the Riksbank is doing. It is arguments of this type that made my British colleague Mervyn King declare, with reference to the work of the Bank of England’s Monetary Policy Committee, that ‘Divided we stand, united we fall’. I want to emphasise that these matters are by no means simple. It seems to me that a clear analytical framework, combined with a high degree of transparency, has provided a good foundation for Swedish monetary policy in recent years. But with an Executive Board consisting of six members, each of whom is in a position to voice an opinion on monetary policy, it is probable that from time to time the Riksbank will be criticised for being indistinct.
But transmission through the exchange rate channel is uncertain and volatile, as the exchange rate is also an asset price that fluctuates with speculative capital flows and can deviate from equilibrium over time, only to correct quite suddenly. Unless the financial system is even better protected, this process can interact very badly with financial stability, as was the case in Iceland during the financial crisis. In its publications “Monetary policy in Iceland after capital controls” and “Prudential rules following capital controls”,2 the Central Bank has described the framework that it considers appropriate to replace the pre-crisis framework. Much of what is described in the two reports has already been put in place, but the final brushstrokes remain undone. We intervene in the foreign exchange market; i.e., we have a managed float and not a free-floating currency. We have adopted prudential rules that greatly reduce the banks’ opportunities to take risks with their foreign currency balance sheets. We have established a Financial Stability Council and a Systemic Risk Committee in order to monitor financial system risk more effectively than we did previously, and we are developing prudential rules and macroprudential tools to respond to systemic risk. This will make the conduct of monetary policy easier. And in addition, I hope that statutory amendments will be passed soon in order to put brakes on foreign-denominated lending to resident borrowers without foreign currency income and assets.