they do not focus only on stabilising inflation but also take account of real economic developments and possibly other factors too. However, the present degree of flexibility in inflation-targeting policies has probably not always been regarded as so obvious as it is today. At least as far as Sweden is concerned, I think I am right in saying that it has been a gradual process that has brought us to where we are today. That is probably also true for many other inflation-targeting countries. Immediately after the announcement of the inflation target in 1993, the Riksbank tended to formulate policy as if the intention was to be anything but flexible. This may have been because the credibility problems in the 1970s and 1980s were considered damaging and were deemed to warrant “tough talk”. Whether it was a wise strategy to begin in this way with a one-sided focus on inflation is perhaps open to question. One could argue that it would have been better to choose a more balanced line from the outset. It might then have been possible to counteract some of the criticism levelled at the Riksbank for supposedly “focusing exclusively on inflation and completely disregarding employment”. From the mid-1990s and onwards, though, the Riksbank tried in various ways to clarify that we were not focusing solely on stabilising inflation. I believe it is correct to say that the implementation of policy also began to become more flexible around that time.
It does however claim that there is a discrepancy between word and deed that raises questions regarding what status the stabilisation of the real economy really has in relation to stabilising inflation. I should perhaps underline here that this criticism, as I understand it, does not say that there has been greater clarity in countries that do not have specific targets for inflation. In my opinion, the assertion that the communication of inflation-targeting central banks generally tends to focus a lot more on the stabilisation of inflation than of the real economy is essentially correct. Inflation forecasts undeniably have the leading role in the reports published by these central banks, and it is usually on the basis of these forecasts that the banks explain their policy decisions. So why have central banks that pursue a flexible inflation targeting policy chosen to concentrate on inflation in their communication and often been rather vague as regards how they look upon the trade-off between stabilising inflation and stabilising the real economy? One important explanation, which I already have touched upon, is probably that many of the economies that have adopted inflation targeting policies were previously beset with high, sharply fluctuating inflation. The task, accordingly, was to create broad understanding and credibility for a new policy focused on price stability.