It is in light of this that the Riksbank’s gradual cuts in the repo rate down to zero should be regarded. It is thus a question of adapting monetary policy to changed circumstances and not of a 180-degree turn as a result of a sudden insight that the policy conducted has been wrong from the start. Criticism also from other quarters However, cutting the repo rate to zero has not only been criticised for being a “last-minute conversion”. It has also been criticised from other quarters. There are those who say that the Riksbank’s attempts to give consideration to the risks linked to indebtedness and housing prices have been well-founded, and that a very low interest rate over a long period of time is risky – like “throwing petrol on a fire”.20 Without doubt, the situation with regard to the housing market and household debt will become more problematic the lower the repo rate is and the longer it remains low. Nevertheless, I think that the Riksbank has made the right decision and that there has not really been any other alternative. In the end, a central bank’s main task is to maintain confidence in price stability and when there is a risk that this will fail – when the scale starts to tip – there is no other possibility than to give top priority to a faster return to the inflation target.
The reason I  8  BIS central bankers’ speeches  am returning to this forecast is that I don’t think anyone would question that the National Institute of Economic Research is a serious and competent forecaster – and it can scarcely be accused of deliberately spreading “misleading pictures of the future”. And as I said, the National Institute of Economic Research’s forecasts were not in any way unique, but reflected well how forecasters in general viewed the situation. Anyone who claims to have predicted the current low inflation back when the repo rate increases began in 2010 must thus have had much greater insight than all of the Swedish and international analysts. I would rather argue that this instead is a good illustration of the fact that things have happened in the economy, which could not be predicted and which have pushed down inflation in an unexpected manner. Unexpected international economic slowdown in 2011 and even lower inflation in 2013–2014 I would like to give examples of two occasions in recent years when developments have turned out rather differently than expected. The first is the slowdown in international economic activity that became apparent during the second half of 2011. Global growth prospects deteriorated in connection with increased unease over the sovereign debt problems in the United States and euro area. Uncertainty over the future led to increased pessimism among households and companies and also affected the financial markets.