These criteria – combined with an important role for the central bank, which I have argued in favour of today – are also largely reflected in a recommendation from the European Systemic Risk Board (ESRB). The European macroprudential supervisory body ESRB was created in response to the financial crisis and began operating in 2011.12 The purpose is to contribute to preventing or reducing systemic risks in the EU. The primary instrument for doing this is the ability to issue warnings or recommendations if significant risks are identified. The ESRB  11  See, for instance, the Executive Board’s consultation response to the report Evaluation of the Riksbank’s monetary policy and work on financial stability 2005–2010 (2010/11:RFR5), published on 30 November 2011. In addition to the four criteria, it is also emphasises there that the Riksbank should play a central role in macroprudential policy, which I have argued in favour of today. 12  It is headed by ECB Chairman Mario Draghi and consists mainly of the central banks and financial supervisory authorities within the EU, with the first-mentioned having the right to vote. 6  BIS central bankers’ speeches  does not have any binding instruments of its own at its disposal; instead it assumes that the EU member states themselves will establish systems for this. Thus, an important part of the discussion on how macroprudential policy should be organised is the ESRB’s recommendation to the EU member states’ governments in this field, which was published in January 2012.
To the extent that the real exchange rate also weakens, it contributes to an increase in net exports, as the relationship between export and import prices changes.3 Two of the three channels for monetary policy thus have an impact by affecting demand and supply with regard to credit in the economy. One sometimes also talks about a fourth channel; the risk-taking channel, which means that a lower interest rate contributes to the banks increasing their risk-taking when lending.4 All in all, it is clear that monetary policy has an effect on household debt and asset prices, although it can be difficult to determine exactly how large and how lasting this effect is. We have limited experience of low interest rates over longer periods of time. There is a clear risk that the current low interest rates will encourage greater indebtedness than is reasonable in a long-run perspective. But, at the same time, the interest rate is a blunt instrument to manage the risks linked to household debt and house prices. One reason for this is that an adjustment in the interest rate also affects the economy through the exchange rate channel, which has further effects on inflation and the real economy. But the impact of the interest rate can also be too broad in other ways, such as when one wishes to slow down household borrowing but not corporate investment.