It is our task to ensure that the temporary effects remain temporary and do not become entrenched. Do we only focus on inflation? Another question that has arisen in the recent debate is to what extent the Riksbank should take production and employment into consideration. Let me first say that when it comes to the relation between low and stable inflation and good growth, one does not exclude the other. The actual purpose of the inflation target is to provide the conditions for good economic growth that is sustainable in the long term. Furthermore, the Riksbank shall also give some consideration to developments in production and employment in the individual interest rate decisions, as long as it appears possible to attain the inflation target. Monetary policy is flexible. We are no “inflation nutters” as my British colleague Mervyn King has put it. The Riksbank cannot stabilise inflation at 2 per cent all of the time. Sudden increases in oil, food, clothing or any other kind of prices can push up inflation. Our interest rate policy is then designed so that inflation can be expected to be back on target within a couple of years, not next week. The fact that it may take some time before inflation is back at 2 per cent provides some scope to take into account production and employment. The Riksbank thus has some scope to give consideration to developments in economic activity. This is something we actually do.
We are six different individuals on the Executive Board. We have different backgrounds and different perspectives. Sometimes this leads to our assessments differing, even if we work towards the same objective. It applies in particular to very uncertain situations like the present one. But the whole idea of having an Executive Board is that disagreement is permitted. Different approaches and opinions enrich the discussions and hopefully lead to better decisions. BIS Review 115/2008  5  My own assessment So how did I reason at the most recent meeting, when I voted for another increase of a quarter percentage point? Well, to begin with it is important to put an individual decision in the right perspective. Monetary policy acts with a time lag and what affects inflation a couple of years ahead is a series of interest rate decisions rather than an individual interest rate increase, or cut, for that matter. My decision in September was therefore closely connected to both the interest rate policy we have conducted over the past few years and the interest rate path I expected to see in the future. A new phase We have experienced a long period of low inflation and high growth from a global perspective, but we have now entered a new phase. In developed economies like the United States and the euro area growth is falling, while it remains high in emerging economies such as China, India and Brazil.