Many who have been critical of the policy conducted by the Riksbank claim they support the monetary policy framework and the inflation target. But bearing in mind the aim of monetary policy having been to keep inflation around the target and to maintain confidence in it, and that the Riksbank has had to work quite hard to achieve this, it does not seem far-fetched to conclude that the criticism is implicitly nevertheless that the target itself should have been different. This is true at least if one believes that monetary policy could have been very different to what it has been. And this is exactly the opinion many critics must be perceived to have; otherwise it is difficult to understand at all why the discussion is so lively. In this context, it can be worth emphasising that the expansionary policy conducted by the Riksbank has been just enough to bring up inflation to 2 per cent. Inflation has never been excessively high in recent years, but on the contrary has recently fallen back somewhat and is now once again below the target. It is therefore difficult to see how we, so to speak, have gone too far in view of our target. I think it is reasonable that those who claim they support the monetary policy framework and the inflation target, but nevertheless have been critical of the policy conducted, take this into consideration.
The reason is that it has proved difficult in practice to lower nominal wages. If inflation is low and nominal wages cannot be lowered, then it becomes difficult to adjust real wages between different professions, companies and sectors. This can ultimately lead to both higher unemployment and poorer productivity growth in the economy. A moderate level of inflation mitigates these problems. It functions as grease in the wheels of the economic machinery. Another advantage with an inflation target of 2 per cent, which has come to the fore in recent years, is that it creates at least some scope for lowering the policy rate before it reaches its lower bound. If the inflation target, and hence average  4 [17]  inflation, were to be lower, then the nominal rate would also on average be lower. This would be particularly problematic in a world where real interest rates are very low, as is currently the case. The scope for lowering the rate before it reaches its lower bound would then be more limited than it is today, which would make it more difficult to counteract future recessions. Therefore, if one does not like negative interest rates, one should not advocate a lower inflation target, as that would imply that the policy rate would have to be negative for longer periods. In the international debate, moreover, there are several economists who think that not even an inflation target of 2 per cent provides sufficient scope to conduct as expansive a monetary policy as is sometimes necessary.