It wishes to divide the Riksbank’s toolbox into different parts and micro regulate which tools should be used when, where and how. The effect will be a narrowing of the concept of monetary policy, less independence and freedom of action for the Riksbank, and an impaired ability to adjust monetary policy to changed conditions. In this event, Sweden will have its own definition of monetary policy that deviates markedly from the rest of the EU and the world. As I have explained above, monetary policy is so much more than just a short-term adjustment of the interest rate and purchases of government securities. The Riksbank Inquiry is not characterised by this insight. According to my way of seeing things, the Inquiry is far too attached to the simple model used at the start of the 2000s. Despite the lessons of a global financial crisis, the Inquiry has chosen to cling to a model typical of this earlier period. It is extremely important for the Riksbank that we have a Sveriges Riksbank Act that allows leeway for a changing world and that accepts that monetary policy, not just in Sweden but internationally too, now looks different compared to twenty years ago. And what will the world look like in twenty or thirty years? If the Riksbank is to continue to function for many decades, it needs to focus more on principles and combine clarity over the Riksbank’s tasks with flexibility over how this can be achieved.
Instead of one tool, the policy rate, central banks now use several different tools. Previously, the focus lay on influencing the financial conditions via a short-term, risk-free interest rate that primarily affects the banks’ funding. Now, central banks also introduce measures that directly affect more long-term and even non risk-free interest rates. These too can lead to the intended effects on the interest rates and other credit conditions that households and companies face, and thereby to the desired effects on capacity utilisation and the rate of inflation. Another way of describing the menu of monetary policy measures that are now being used is that they concern both sides of the Riksbank’s balance sheet. When the policy rate is adjusted, this entails changes for a part of the Riksbank’s liabilities. 8 And when the Riksbank purchases different types of assets, this means that the asset side changes. In other words, today’s monetary policy works with the entire balance sheet. 7  Rajan (2005) is a very well-known reference. 8 In 2020, the Riksbank has also changed the conditions for other kinds of liabilities. 6 [13]  Crisis preparedness – part of monetary policy Another change is that the central banks have been reminded of the importance of not just being able to stabilise normal economic cycles but also being prepared to act rapidly and broadly to restrain the effects of crises affecting both the development of the real economy and the financial system.