I see a risk in allowing monetary policy to continue to lean against the wind until one sees tendencies for  15  I n a long-run perspective, inflation below the target could lead to unnecessarily high unemployment if inflation expectations are firmly anchored around the target (see Svensson, 2013). In the same way that unexpectedly high inflation benefits those who borrow and is a disadvantage to those who lend as the real value of the debt becomes lower than anticipated, unexpectedly low inflation can benefit those who lend at the cost of the borrowers. BIS central bankers’ speeches  7  inflation expectations in the long run to begin to adjust downwards. That is a situation that might be hard to turn around. Target attainment is important for credibility One argument that is sometimes put forward is that the differences between what the majority of Executive Board members and the minority advocate are so small and that in practice it is not very important whether or not one cuts the repo rate a little more. And in a strictly “mechanical” sense, it is perhaps true that a policy rate that was 0.25 percentage points lower for a period of time would have a limited effect on the economy. But for the sake of credibility and target attainment in the long run, it is also important how households and companies perceive monetary policy. How seriously does the central bank view the inflation target?
I believe that the high level of debt, combined with an unwillingness to have higher debts than assets, could in such a situation have negative effects on growth in consumption.10 I would therefore feel more secure if the level of debt was lower, or at least was not increasing. But if I would feel more secure with a lower level of debt, why not use monetary policy to try to slow it down? The answer is simply that the disadvantages with using monetary policy in this way outweigh the advantages. A trade-off between target attainment at different horizons One fundamental problem here is how to make the trade-offs clear to economic agents, which is necessary if one wishes to convince them of the need to lean against the wind. The policy the Riksbank has conducted for some time means that one deliberately allows longer time for both inflation and the real economy to return to normal levels. At the same time, this is justified by the Riksbank’s mandate to stabilise inflation around the inflation target and production and employment around long-run sustainable levels. It is probably not clear to everyone how the actual aim of the policy is connected to the justification for it. The tradeoffs therefore need to be made concrete and clear – partly so that the Riksbank’s principal can assess its monetary policy, and partly so the general public can understand the basis for the policy the Riksbank conducts.