Hence, the extent of financial stability cannot be summarised in a single, simple financial variable. This type of measurement problem is in fact also apparent in the inflation rate and the resource utilisation. The formal inflation target for the Riksbank is measured using CPI, but we also use various measures of underlying inflation. In order to measure resource utilisation, we look at a series of different measures such as the GDP gap, unemployment gap and the employment gap. For inflation and resource utilisation, we have long learned to use different measures even though we know they are inherently uncertain. Applying that experience will be useful when it now comes to evaluating different measures of financial stability. Financial stability cannot be assessed by relying on various indicators alone, though. The reasons for the development must also be understood. It can be compared to the reasoning of central banks in assessing inflation. An increase in inflation does not in itself constitute a reason for increasing the policy rate. Appropriate monetary policy depends on the reason for the change. If the rise is due to price pressure from increased demand, the monetary policy will not be the same as it would have been had the rise been due to lower productivity. Similarly, rapid credit growth is not necessarily always a sign of lending being unsustainable and posing a threat to financial stability. A hot topic on that subject is how much house prices and the debt build-up of households should weigh in monetary policy assessment.
I will start to discuss monetary policy and then move on to macroprudential policy. The monetary policy framework is in need of review As I have mentioned, monetary policy of the 1990s and up to the financial crisis was viewed as successful by many. It was considered that this played an important role in both the relatively low and stable inflation, and the relatively stable GDP growth during those years. During the global financial crisis, it came to light, however, that major financial imbalances had been built up despite the seeming stability of many macroeconomic indicators. An important lesson from the financial crisis is therefore that low and stable inflation does not always guarantee financial stability or sustainable economic growth. The huge costs of the financial crisis to the real economy have led central banks around the world to start thinking about the current monetary policy framework. The challenge ahead is to create a framework which continues to safeguard stable prices, but which at the same time is consistent with a sustainable development in the financial system. Financial circumstances therefore need to be accounted for in the monetary policy decision-making. Taking account of financial factors in monetary policy decisions Different approaches can be used to formally take greater account of financial stability in monetary policy decisions. For instance, how much a change in the policy rate affects the probability of a financial crisis can be calculated.