See, for instance, “Vägen till ett stabilare Sverige” (the road to a more stable Sweden), Economic Policy Group report 1985, Center for Business and Policy Studies (SNS). A retrospective  BIS central bankers’ speeches  3  Almost at once, the question arose of what would guide monetary policy in Sweden, now that the fixed exchange rate had been abandoned. 6 By this time, some countries had already introduced inflation targets: New Zealand was the first in 1990, followed by Canada in 1991 and the United Kingdom in 1992. In January 1993 the Riksbank decided to introduce the inflation target we have now: The annual rate of increase in consumer prices shall be 2 per cent a year. 7 As we saw earlier, it is extremely important that the nominal anchor is credible. The results of academic research indicated that the conditions for attaining low inflation increased if one delegated monetary policy to an independent central bank, which focused on a clearly quantified target. This increased the element of “norm-based thinking” in monetary policy. The motives for short-term deviations from the inflation target declined, for instance, by trying to stimulate demand to gain political sympathies prior to an election. This also reduced the so-called time inconsistency problem in monetary policy, where the long-term objective of low inflation is not compatible with the short-term motives for high inflation. 8 The new Sveriges Riksbank Act meant that we have had an Executive Board with six members and greater independence from the political system since 1999.
The Riksbank’s objectives and means have been influenced by developments in society Figure 1 illustrates inflation in Sweden over the past 140 years and the exchange rate regimes we have had during this period. Something that becomes clear is that even if we have now become used to a flexible exchange rate, over a long period of time a fixed exchange rate has been much more common. However, from time to time socioeconomic developments in general have led to the prevailing monetary policy regime being reconsidered. 1 As you know, Sweden has not introduced the euro as currency, but on the other hand we were part of a Scandinavian currency union between 1873 and 1924. 2 This began a period with different varieties of fixed exchange rate, which – with the exception of the First World War and a brief period in the 1930s – came to last until 1992. During 1931–1937 the Riksbank worked with a price stability target, for some years this was also combined with a fixed exchange rate. It would take another 50 years until we introduced a price stability target again. 1  This also applies to the central bank’s mandate in a broader sense. See Georgsson, M, Vredin, A. and Åsberg-Sommar, P., “The modern central bank’s mandate and the discussion following the financial crisis” Economic Review 2015:1, Sveriges Riksbank. 2  This cooperation largely came to a halt in connection with the outbreak of the First World War ten years earlier.