The current debate sometimes gives the impression that the Swedish economy has for some time been in a situation of almost overheating. But the fact is that we fairly recently, according to most empirical estimates, once again attained a level of resource utilisation that can be described as normal. Thus, although such estimates are uncertain, the Swedish economy appears to have been producing below, rather than above, its long-term capacity for several years following the financial crisis. 6 [20]  Confidence in the inflation target unimportant or possible to maintain with a different policy? One thing that is rarely done, but I think is of utmost importance, is to spell out the practical consequences of this criticism. It is of course easy to agree that if the Riksbank had not needed to defend confidence in the inflation target, then monetary policy would not have needed to be so expansionary and the repo rate would perhaps not have needed to be negative. One may therefore draw the conclusion that those who say that monetary policy is wrong are arguing one of the following: Either that confidence in the inflation target is not so important, or at least less important than other things, or that the Riksbank should have been able to conduct a less expansionary policy while still being able to safeguard confidence in the inflation target.
The criticism lived on for quite a long time, but it was probably quite essential to demonstrate at that time that the inflation target was taken seriously. This was until now the only time I can remember that the Riksbank was urged not to do its best to maintain confidence in the inflation target. The criticism then was largely due to the inflation-targeting policy being so new – as I said, the inflation target had not yet even come into force. It is less easy today, after twenty years of positive economic developments, in which the inflation target has been a cornerstone, to see why the Riksbank is being urged to lower its ambitions. Perhaps it is because developments have been so positive for so long that one feels the existence of a credible nominal anchor is no longer as important. If so, I am convinced that this is a mistake. Difficult to see reasonable alternatives to the policy conducted But what about developments in household debt and housing prices? Don't they give a reason for changing monetary policy? The Riksbank has previously used the repo rate to try to subdue the upturn in debt and housing prices. But this was on a fairly modest scale and – above all – during a period when confidence in the inflation target appeared firmly rooted. 9 In recent years, on the other hand, there have been signs that this confidence has begun to be undermined, which has changed conditions rather drastically.