It would likely be difficult to maintain confidence in the inflation target by using such a strategy. Inflation has already undershot the target for several years and would in that case continue to undershoot the target for some years to come. The fact that inflation has been 6  BIS central bankers’ speeches  low for a long time is probably a major reason why long term inflation expectations have fallen. Conversely, the trend we have witnessed over the past year of a slowing fall in inflation expectations has coincided with monetary policy becoming very clearly expansionary and underlying inflation beginning to rise. Against this background it would likely be difficult for the Riksbank to maintain confidence in the target solely by communicating that the inflation target is still valid, without in any way reinforcing that claim with policy measures. A higher repo rate would weaken economic development The idea behind the Riksbank needing to have more patience and accepting that inflation will continue to remain below the target for an even longer period seems to be that the policy rate could then be raised to slow the rise in debt and housing prices. But the Swedish repo rate does not exist in a vacuum. Interest rates are also low internationally. Higher interest rates in Sweden in relation to those abroad would strengthen the krona and lead to a weaker real economic development. This would dampen inflation.
What I perceive to be the most common argument for lowering the target is that trends such as globalisation and digitisation are assumed to have such a highly dampening effect on inflation that it is impossible, or at least extremely difficult, to achieve the 2 per cent target. Do digitisation and globalisation lead to permanently lower inflation? There are several, and I think convincing, reasons why it is a bad idea to lower the inflation target. One is that it is far from obvious why digitisation and globalisation would give rise to permanently lower inflation. The arguments presented are often relatively vague, and say that stiff competition and squeezed margins have changed the economic playing field for companies in various ways. However, because the margins cannot keep falling indefinitely, this kind of price pressure can only lead to a temporary effect on inflation. And regardless of  2  See for example Mitelman (2013), Fölster (2015), Hökmark (2015), Andersson (2015), Schück (2015), Expressen (2015), Sydsvenskan (2015), Cervenka (2015), and Krister Andersson in Dagens Industri (2015). 3  See for example Winsth and Isaksson (2015), Engzell-Larsson (2015), Lars Jonung and Robert Bergqvist in Dagens Nyheter (2015), Mitelman (2015), and Jakobsson (2015). 4  Some even think that the inflation target is in conflict with the Sveriges Riksbank Act and the task delegated to the Riksbank by the Riksdag (Swedish parliament) (Mitelman, 2015b). This is obviously not correct.