9 [15]  cause a bad scenario with more permanently high inflation. It is enough that some of it does. Interaction important even when inflation is too high Let me round off. I often point out that the inflation target is not just the Riksbank’s target but is a target for society as a whole. Of course, it is the Riksbank that is appointed to attain it, but how well this succeeds is of great importance from a much broader economic perspective. There is strong political support for the inflation target, which, in turn, is based on the conviction that the economy simply works better with a specific, low and stable inflation rate. The development we have had since the introduction of the target also indicates that this is indeed the case (Figure 7). Over the past decade it has become clear that a system where responsibility for the inflation target is seen as entirely resting with the Riksbank, and not as something which agents in general should support, can be problematic. This was evident during the long period when the Riksbank’s policy rate was close to the lower bound, and the Riksbank also supplemented its policy with other measures such as asset purchases, but it was nevertheless difficult to bring inflation up to the target. This was not a specifically Swedish phenomenon, but a problem that many advanced countries wrestled with. Monetary policy in isolation was simply not enough.
Instead of defending a fixed exchange rate, the task of monetary policy would be to keep inflation low and stable. In January 1993, the Riksbank announced that an inflation target of 2 per cent would enter into force as of 1 January 1995. Gradually, the new order was confirmed through changes in the monetary policy framework. The price stability target was written into the law in 1999 and monetary policy decisions were delegated to an independent Executive Board. The Riksbank is therefore now in a much better position to take forceful action to counteract high inflation. Another facilitating factor is, of course, that  5 [15]  the period of inflation targeting has meant that long-term inflation expectations are initially much better anchored than they were in the 1970s and 1980s. Fiscal policy, for its part, would focus considerably more than before on keeping public finances in good condition so as to maintain market confidence. The budget process was changed so that it would be easier to gain control over expenditure developments, while public net lending would, on average, be positive through the so-called surplus target. These changes have meant that fiscal policy no longer contributes in itself to persistently high inflation, as was the case in the 1970s and 1980s. Swedish wage formation was also changed and now works in a completely different way than in the 1970s and 1980s.