The background here is that the policy is currently associated so strongly with a single person, Alan Greenspan, and there is concern about what will happen after him. To me, proposals of this kind about a more pragmatic policy seem rather naive. Policy principles that are less clear-cut, combined with a less transparent basis for decisions, by no means guarantee a BIS Review 98/2000  6  successful policy in the longer run. Just the reverse, I would say in the light of many years of decision-making in economic policy. One of the most important things to do in work of this type is try to build up distinct processes whereby a foundation for decisions based on sound economic analysis is produced systematically and then subjected to as broad a scrutiny as possible. One will then at least have provided conditions for consistent and wise decisions. That in turn is fundamental for all credibility in monetary policy, too. I believe, moreover, that decisions should be made in ways that contribute to insight and afford good opportunities of evaluating them and exacting accountability. These are requirements I consider people in Sweden should be entitled to make of an institution which has been given such a strong and independent status as the Riksbank. The current monetary policy situation Let me conclude by briefly presenting my view of current economic developments and their implications for monetary policy. For a couple of years now the Riksbank has had reason to count on rising economic activity.
One example is the interest rate fluctuations, which have shown up in the own homes item in the CPI. During 1996-97 in particular, the CPI was relatively far below not just the targeted rate but also the lower tolerance limit. To a fairly large extent, this was because the Riksbank lowered the interest rate markedly with a view to ensuring that the target would be met a little later on. In the period 1993-98 the Riksbank tried to explain how effects of this kind would be handled. But not everyone considered the policy was sufficiently clear. The Riksdag (Sweden’s parliament), for  BIS Review 98/2000  2  example, assessed the Riksbank’s performance solely in terms of the CPI outcome even though there had been long periods when monetary policy had focused on other indicators that exclude transitory effects. In the best of all possible worlds one would prefer to use an indicator of inflation that excludes all those effects one wants to disregard. Unfortunately, there is no such indicator that suits every situation. For example, a tax increase may, under certain circumstances, need to be excluded as a transitory effect. In other cases, however, tax increases should be taken into account when formulating policy because they are a part of the inflation process. Against this background, in 1999 the Riksbank declared that in connection with every monetary policy decision, any grounds that existed for modifying the policy’s target variable would be clarified.