Without stability in the financial system it becomes more difficult to conduct monetary policy, and price stability is part of an effective payment system. Practically and organisationally, however, these are two separate fields of work. You could say that we normally use two different toolboxes to perform these two tasks. First, we have a monetary policy toolbox, parts of which I have already described. The monetary policy measures, for example the setting of the repo rate, have a clear objective: to influence economic activity with the aim of maintaining price stability. This in turn is an important component of our efforts to achieve stable development in the real economy. Second, we have a box of tools for promoting stability in the financial system. Financial stability is a basic prerequisite for a safe and efficient payment system. The Riksbank normally uses tools other than the repo rate to promote financial stability. Our analyses of the risks in the financial system that we produce and publish every six months in our "Financial Stability Report" represent the primary tool in this toolbox. If nothing else, this and other feedback that we provide to the banks makes them more aware of potential vulnerabilities and, in the best case, gets them to take preventive measures. This is usually referred to as "moral suasion". But this toolbox also contains more concrete tools. These include the possibility to quickly add liquidity to the banking system.
This is a difficult question that requires more detailed analysis, but it is unlikely that it will be easy to reach a general policy conclusion. I am convinced, on the other hand, that many central banks will review their macroeconomic models and more precisely define the role of asset prices in the transmission mechanism. I do not believe, however, that we should exaggerate the ability of monetary policy to prevent crises from arising. Even if excessively expansionary monetary policy can contribute to the build-up of a bubble, it is less clear to what extent monetary policy can entirely prevent this from happening. It is probable that it would require fairly substantial interest rate increases, something that may not be received sympathetically when the reasons for the increases are not crystal clear. But more moderate interest rate increases could, of course, contribute somewhat. If nothing else, it  14  BIS Review 41/2009  would provide a signal from the central bank that it envisages certain development problems. I also believe that risk scenarios with a longer forecast horizon may be an option for clarifying what the risks may be in the longer term. It is conceivable that the price of housing or some other asset may be driven by factors that are difficult to explain or which may be assumed to give rise to inefficient risk allocation and large fluctuations in economic activity and inflation.