To get an idea of what is possible, however, we can compare the results in other countries that have had a fixed inflation target as long as Sweden, that is, since the early 1990s. It is also reasonable to exempt the very first years of the new inflation-targeting regime for Sweden and other countries. Canada has had an inflation target since 1991, which from the end of 1995 is 2 per cent and its average inflation rate during the period 1996–2011 is 2.0 per cent. The United Kingdom has had an inflation target from the end of 1992, which was however modified in 2003/2004. Up to the end of 2003, the UK inflation target was 2.5 per cent, when measured using the RPIX price index, and the average inflation rate in 1996–2003 was 2.5 per cent. With effect from 2004 the United Kingdom has had an inflation target of 2 per cent for the CPI, which cannot be regarded as any significant change in level as inflation measured as the CPI is on average 0.75 percentage points lower than when measured using RPIX. 12 The average inflation rate for the period 2004–2007 was 2.0 per cent, while the average for the crisis years 2008–2011 is higher, at 3.4 per cent. However, given the higher rate of unemployment in the United Kingdom stemming from the crisis, a well-balanced monetary policy means that inflation should overshoot the target.
With regard to real economic stability, it is not as simple as merely focusing on employment and unemployment. It is actually not clear which real-economy target variable should be used. The other kind of objection ultimately entails sustainable growth in mortgages and financial stability being separate objectives for monetary policy. One can then neglect the objective of price stability and highest sustainable employment for a while in an attempt to slow down mortgage growth, promote financial stability and maintain a higher interest rate, as it is assumed that low interest rates would build up unsustainable financial imbalances. Clear targets mean that monetary policy is less arbitrary and easier to assess In response to these objections I would like to state that several and unclear targets for monetary policy risks making it arbitrary and difficult to assess, which the work on formulating the Sveriges Riksbank Act aimed to counteract. Delegating monetary policy to an independent Riksbank requires that monetary policy has clear objectives. 7  6  See the discussion of the “normalising argument” in the minutes of the monetary policy meetings and Svensson (2011). 7  “In the opinion of the government, a delegation of monetary policy to an independent Riksbank cannot take place unless the objective of the activities is clear. An independent Riksbank must therefore be given a democratically-anchored objective for its activities. If no objective is formulated, there would be scope for an arbitrary conduct of monetary policy.