I have therefore maintained that the lower repo-rate paths that I advocated between April 2009 and February 2010 would have stabilised both inflation and resource utilisation better than those adopted by the majority of the Executive Board. 3  2  Bill 1997/98:40. BIS Review 60/2010  The repo rate and the repo-rate path are means, not ends Are there other aspects of the repo-rate path to consider apart from the fact it should stabilise inflation and resource utilisation? It is important to realise that the repo rate and the repo-rate path are means and not ends in monetary policy. “A normal repo rate” is not a target for monetary policy. There is no support in the provisions or the preparatory work of the Sveriges Riksbank Act for using a too high or a too low repo rate as a reason to stabilise inflation and resource utilisation less effectively and in this sense set aside the objectives regarding price stability or the stability of resource utilisation. Consequently, I cannot see any situation when monetary policy should set aside price stability and the stability of resource utilisation so as to “normalise” the repo rate and the repo-rate path in order, for example, to get away from a “crisis rate”, or to attempt to influence credit volumes or house prices, or because the economy has bottomed out and economic activity has begun to pick up. The focus of monetary policy should always be on achieving the best stabilisation of both inflation and resource utilisation.
This would entail prejudicing, or setting aside, the price-stability target. Without prejudicing the price-stability target, monetary policy cannot aim at a higher level of resource utilisation than the normal level. It is thus a misconception, and unfortunately a common one, that the stipulation to not prejudice the price-stability target means that monetary policy should only aim to stabilise inflation around the inflation target irrespective of what happens to resource utilisation, what is usually referred to as strict inflation targeting. The stipulation means instead that monetary policy should also stabilise resource utilisation, but around a normal level, not a higher level. As far as I can judge there is now general agreement about this interpretation of the provisions of the Sveriges Riksbank Act and its preparatory work. So, at every monetary policy meeting we, that is the members of the Executive Board, have to decide what repo-rate path will best stabilise inflation and resource utilisation. The Riksbank usually expresses this by saying that monetary policy should be well balanced. If there is a conflict between stabilising inflation on the one hand and stabilising resource utilisation on the other, then a well-balanced monetary policy entails a reasonable compromise between the two. Such a conflict is in fact regarded as the normal situation, but a conflict does not always exist. In my view, there is no such conflict at present.