As far as Sweden is concerned, it is quite clear that the inflation target has helped provide greater orderliness by playing this role, and this has probably been an important explanation for the Swedish economy having developed so favourably since the crisis at the beginning of the 1990s. … but these benefits seem to have begun to fall into oblivion As I noted earlier, there is broad support for the inflation target. But as regards wage formation, there is currently an opinion, at least in some quarters, that the inflation target has played its part and become irrelevant: It was important when bringing down wage inflation from its high levels of the 1970s and 1980s, but once this has been achieved, the target no longer fulfils any function and might as well be abolished. For several reasons, I see this as a historically questionable and myopic argument, and it would be unfortunate if this view were to gain a firmer foothold. First, it is always sensible to not let oneself be influenced too much by the prevailing situation when discussing the design of frameworks that are expected to be stable and be in place for a long time. It is of course true that the kind of inflation  9 [17]  and wage surge seen during the 1970s and 1980s does not seem likely in the foreseeable future. But at the end of the day, what do we really know about how the situation will be a few years in the future?
The final brushstrokes entail developing tools that will, if applied, restrict the benefits accruing to nonresidents as a result of our having higher interest rates than our trading partners. The precise structure of this will come clear in the next few months, but possibilities include some form of taxation or a special reserve requirement. 2  Central Bank of Iceland Special Publication no. 4: Monetary policy after capital controls, December 2010 and Central Bank of Iceland Special Publication no. 6: Prudential rules following capital controls, August 2012. http://www.cb.is/publications/publications/special-publications/  BIS central bankers’ speeches  5  I have now reviewed the multiple crossroads that I mentioned at the outset. Each one of them poses a challenge for monetary policy. But it is not least the interactions among them and the timing that make monetary policy so unusually complicated at present. For instance, it would be much easier to cope with capital inflows if domestic economic developments did not call for a tighter monetary stance at this juncture. The oft-quoted Chinese blessing – or curse – “May you live in interesting times” – continues to follow us. Thank you. 6  BIS central bankers’ speeches