This fall started earlier than in most other countries (see Figure 1). To counteract this development, the Riksbank started to cut the repo rate at the end of 2011. One circumstance that has a certain significance for my discussion going forward is that the Riksbank was already concerned about the rise in household debt and housing prices by this point. With the aim of contributing, to some extent, to dampening the build-up of debt and price increases, the repo rate was set slightly higher than otherwise would have been the case. 8 This is usually described as monetary policy ‘leaning against the wind’, where the wind represents some kind of financial imbalance that is deemed to be building up. However, what is important to understand is that, at this time, monetary policy was nevertheless largely governed by traditional monetary policy motives, that is, the expected development of economic activity and inflation over the coming years (see Figure 2). Risks linked to developments in household debt and housing prices were included in the assessment but did not play a leading role. I discussed this in detail in a speech a few years ago and, consequently, I shall not say much about it now. 9 But let me just emphasise that neither did other economic analysts consider that the monetary policy conducted was mainly a matter of the Riksbank  7 The CPIF is the CPI with a fixed interest rate.
6 [20]  of the problems among the general public, market participants and economic policy decision-makers. But it is, of course, necessary that this raised awareness results in concrete measures or changed behaviour that counteracts the financial imbalance. It is doubtful, as far as Sweden is concerned, whether it can be said that this has been the case, at any rate not to such an extent or at such an early stage as could have been hoped for. The fairly modest leaning against the wind that we practised was thus insufficient to halt the build-up of debts and housing prices. Nevertheless, I myself was not prepared to keep the rate any higher than we did in an attempt to achieve this. This was also apparently true of the Executive Board as a whole. If we had set the repo rate significantly higher, the increase in indebtedness would perhaps have stopped more permanently, but, at the same time, there is a severe risk that the development of the economy would also have been significantly worsened. Perhaps even more importantly, the development of inflation would have been even weaker than it actually was and it would have been even more difficult to bring it up and maintain confidence in the inflation target. One further conclusion, or lesson, is that a policy that leans against the wind requires that there is confidence in the inflation target.