Per Jansson: Perspectives on the Riksbank’s monetary policy Speech by Mr Per Jansson, Deputy Governor of the Sveriges Riksbank, at the Centre for Business and Policy Studies, Stockholm, 7 June 2013. * * * Nowadays one can hardly open a newspaper without seeing headlines about the Riksbank. Many have opinions about the monetary policy we have conducted in recent years, and the one we are conducting now. The opinions differ in nature. The Riksbank has conducted the monetary policy we consider best balanced to attain the inflation target and create conditions for long-run sustainable growth. However, some analysts have not shared the Riksbank's view of economic prospects and have therefore reached slightly different conclusions as to how monetary policy should have been designed. Of course, this type of difference of opinion is not particularly remarkable in a field such as monetary policy, where decisions necessarily have to be based on assessments. But there are also other objections that are more a matter of principle and aimed at the very way the Riksbank conducts its policy. Although it is not always stated explicitly, the message is that the Riksbank is conducting a policy other than the one it is intended to conduct – that, to put it drastically, the Riksbank has misunderstood its task and is "playing by its own rules". It has been claimed, for instance, that the Riksbank has a tendency to be over-zealous in combating inflation and to care too little about unemployment.
It is also precisely these questions that have been discussed in the general debate on the role of monetary policy in this context. I therefore intend to discuss these questions one by one and in relative detail. Can the repo rate affect housing prices and lending? It is probably true that the effect of a typical change in the policy rate on housing prices and lending to households is on average not very large. In addition, the policy rate is a blunt instrument when it comes to influencing housing prices and lending, as it is an interest rate that applies to the whole economy. This is why more specific tools, what are known as macroprudential tools, are generally perceived as more appropriate than the policy rate for counteracting this type of specific imbalances. But the effect of the policy rate most likely varies quite substantially depending on the circumstances prevailing at a specific time. In some situations it may be enough to make fairly limited increases to subdue an overly rapid upswing in the housing market, for instance, if the central bank combines these increases with communication emphasising that current developments are perceived as cause for concern.13 Small interest rate increases then function more as a concrete "reminder" that the central bank is concerned over  10  King (2012), p. 12. 11  IMF (2013), p. 3. 12  See, for example Svensson (2012).