However, with weaker economic activity abroad and at the same time continued high and broad inflationary pressures, it is important to be prepared for the tightening to be severely felt by many households and companies. High inflation and, at the same time, ever higher interest rates on mortgage loans, consumer credit and corporate finance will be tough for many households and companies, not least those with small margins. But, we cannot allow inflation to become entrenched at high levels. By raising the interest rate now, we will bring inflation down again. This is our mandate from the Swedish Parliament; low and stable inflation will result in better economic development for all. The frameworks we have built are worth defending, but we have built up vulnerabilities that we need to manage. Today, I would particularly like to highlight the question of investments: How can we ensure sufficient investment to build longterm resilience without further increasing household and corporate indebtedness? Does the fiscal policy framework contribute to a lack of investment in defence, infrastructure, education and climate transition? Can it be reformed so that we maintain budgetary discipline but at the same time open up for long-term investment that will improve the functioning of the economy, which also helps alleviate inflationary pressures by reducing supply side problems. 14 [16]  The Riksbank will act to bring inflation back to the target. But, monetary policy is affected by the functioning of the fiscal policy framework and the labour market.
SPEECH DATE:  31 August 2022  SPEAKER:  Deputy Governor Anna Breman  VENUE:  Sveriges Riksbank  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  From 500 per cent to −0.5 per cent to − what is next? * On the afternoon of 16 September 1992, my teacher Conny came into our class and exclaimed: “The Riksbank has raised its policy rate to 500 per cent”. I said spontaneously “no” – I did not believe him. I studied the science programme at upper secondary school and thought I was good at maths, and an interest rate of 500% was something no one could pay. I started to contradict him. But the teacher insisted he was right - and so he was. The Riksbank had raised its policy rate to 500 per cent in an attempt to defend the fixed exchange rate. This sparked an interest that led me to study Economics at university a few years later. The so-called 1990s crisis fundamentally changed Sweden. It led to a series of reforms that we are still living with today: the inflation target, the fiscal policy framework and the Industrial Agreement. At present, the economic policy framework, and not least the inflation target, is being put to the test.