Inflation target and transparency When the Riksbank originally decided to adopt an inflation target, time was short and did not permit extensive analyses. In my opinion, experience to date of the inflation target policy has been favourable. One major advantage of having an established and distinct inflation target for monetary policy is that this can be combined with transparency. Market agents can form a clear picture of the grounds for the Riksbank’s actions. It is, moreover, comparatively easy to understand how the policy functions, which should help in gaining public support for the target. The inflation target is an instrument for stabilising expectations about the conduct of monetary policy; a lack of transparency and distinctness in monetary policy makes it more difficult for inflation expectations to adjust to the target. This in turn can make it more difficult to achieve high, stable growth. In recent years the Riksbank has accordingly been aiming for greater transparency. A highly qualified staff has been built up, intensive efforts have been devoted to developing models and analyses, routines have been constructed for monetary policy preparations and decisions, and a new interest rate management system for monetary policy has been launched. The endeavour to promote transparency is evident in the Riksbank’s participation in public hearings by parliamentary committees, in inflation reports, speeches, discussions and seminars of various kinds, and in the publication of specialist reports.
The cantons – our majority shareholders – are well represented in our supervisory body for operating matters, the Bank Council. As you see, the special characteristics of the Swiss system are taken into account. Federalism is mirrored in the composition of the Bank Council and in the distribution of our shareholdings and – not least – in the distribution of profit. The Swiss constitution and the National Bank Act provide for the SNB’s profit to be paid to the Confederation and the cantons. Two-thirds accrue to the cantons and one-third to the Confederation. However, a distribution can only be carried out if the balance sheet and the SNB’s result allow for this to be done. The robustness of our balance sheet, in other words, setting aside provisions for currency reserves, takes first priority over a distribution. This can be derived directly from the legislation. The appreciation of the Swiss franc against most other currencies weakened our balance sheet last year. In addition, very volatile results may be expected in the next few years because of the current size of the balance sheet and the uncertain situation in the capital markets. Consequently, the possibility that distributions to the Confederation and the cantons will have to be suspended in certain years cannot be excluded. Fiscal interests must take a back seat when it comes to ensuring our long-term monetary policy freedom of action and independence. The Governing Board is also genuinely Swiss.