But a strong independence and plenty of room for manoeuvre entails freedom with responsibility – we have an important analytical and educational task to explain what we do and how this helps us attain our objectives. I want to start by going back in time around 350 years. The motive for our independence – creating long-term stability Every central bank reflects its time and its country, but some tasks are common to all of them through history, for instance, issuing means of payment in the domestic currency, and ensuring the means of payment can be used and retain its value. And this also applies to the world’s oldest central bank – the Riksbank. Monetary policy has always focused on maintaining the value of money. Historically, the Riksbank has tried to do so by having a nominal anchor. 2 The establishment of the Riksbank can be dated back to Stockholm banco, Sweden's first bank. This also became Europe’s first banknote-issuing bank. The value of the banknotes was based on it being possible to exchange them for coins. But when an abundance of banknotes were issued, the general public began to question their value and demanded to redeem them. The nominal anchor gave way. And a bank crash was unavoidable. Riksens ständers bank emerged from the ashes of this in 1668, becoming what we know now as the Riksbank, as an authority under the Riksdag, the Swedish parliament.
Delaying the end of reinvestment puts the emphasis where it needs to be – getting off the zero lower bound for interest rates. In my opinion, this is far more important than the consequences of the balance sheet being a little larger for a little longer. With respect to the issue of how the FOMC will control money market rates with an enlarged balance sheet, the Federal Reserve already has the necessary tool – the ability to pay interest on excess reserves. However, the degree of control could be further buttressed. Enhancing confidence in the Fed’s ability to control money market rates, and hence, inflation, might also help keep inflation expectations well anchored. BIS central bankers’ speeches  5  One method the Fed has been testing is an overnight, fixed rate, reverse repo (RRP) facility. The Federal Reserve posts a fixed interest rate and accepts cash from counterparties, which include some banks, dealers, money market funds, and government sponsored enterprises, on an overnight basis in return for a security. The repo facility is “reverse” because the direction in which the funds and securities move – participants are lending funds to the Fed rather than vice versa. Users of the facility are making the economic equivalent of an overnight collateralized loan of cash to the Federal Reserve. If implemented, the facility could be set up as “full allotment,” which means that there is no cap on the amount of funds accepted from any of its counterparties at the posted overnight interest rate.