On balance, the global economy risks being trapped in a vicious cycle of lower global equilibrium interest rates reducing monetary policy space, exacerbating downside risks, pushing down equilibrium rates further, and leading to a global liquidity trap. This environment raises questions over whether the current inflation targeting framework will provide monetary policymakers sufficient scope to respond to adverse shocks to demand, whether it needs to be adjusted or even replaced. Currently, there is insufficient conventional policy space based on past experience. The average change in policy rates across easing and tightening cycles pre-crisis was around 150 basis points in the UK, and around 250 basis points in the US and the euro area.29 The average easing cycle in the UK prior to the crisis was 250bps. All else equal, insufficient conventional policy space could lead to more frequent, and more costly, episodes at the lower bound. Research indicates that if the equilibrium real interest rate settles at 1%, policy rates could hit zero as much as 40 per cent of the time, resulting in shortfalls of inflation from target and output from potential of up to 2 percentage points.30 Prior to the crisis, the zero lower bound was expected to bind just 10 per cent of the time, with only modest costs as each episode was anticipated to be short in duration.31  27  These flaws reduce the rate of global potential growth, increases its downside skew, and bolsters the likelihood of an extreme downside event (a fatter left tail).
The circumstance that some households are willing to put off the payment of capital gains tax until the future could be a sign that the ongoing level of taxation is too low in comparison to the level of taxation from a sale. All of this makes it important to make structural reforms in housing and tax policy. Our politicians urgently need to address the problems that have arisen and take a long-term socio-economic view of the housing market. 21  0.75 per cent of the tax value with a ceiling of 7,812 kronor. 22 22 per cent. 7 [13]  The macroprudential policy measures have had the intended effect I support the measures taken by Finansinspektionen to manage the risks inherent in household indebtedness. Amortising mortgages is not unusual internationally. After all, a mortgage is a loan and should therefore be repaid. Sweden has previously stood out in international comparisons concerning amortisation culture and the high proportion of interest-only loans. 23 It is therefore reasonable that Finansinspektionen has introduced amortisation requirements. The amortisation requirements have, however, come in for some criticism. One of the arguments is that first-time buyers without high incomes and wealth are excluded from the market, which ultimately also affects new construction and the construction sector. Naturally, it is correct that the macroprudential policy measures affect the borrowing potential of mortgage borrowers. But this is also part of the actual point of the measures. All other factors being equal, amortisation requirements must also have a restraining effect on the development of prices.