BIS central bankers’ speeches  11  The future role of the central bank is taking shape Allow me to conclude by highlighting certain aspects that are important to central banks in terms of creating a framework that continues to safeguard stable prices while at the same time being consistent with sustainable development in the financial system. First, monetary policy should continue to be conducted in the framework of flexible inflation target policy, with price stability as the overriding target. However, the financial crisis has brought to light the importance of monetary policy taking greater account of financial stability. It can be a case of extending the time horizon of the monetary policy analysis, and focusing on price stability over a longer period than just the next few years. Second, financial stability policy requires a new focus, and macroprudential policy is emerging as a new policy area. Macroprudential tools provide better opportunities to strengthen the resilience of banks and other financial institutions to various shocks. They also provide better possibilities of influencing bank lending rates and thus macroprudential policy becomes closely interconnected with monetary policy. Overall, this enables us to work to a greater extent towards achieving a sustainable development in both lending and economic development. Having more tools also facilitates managing the conflicting objectives encountered by central banks, even though there will always be difficult trade-offs. So, there is good reason to give central banks an influential role in macroprudential policy.
An inflation target was adopted and the krona was allowed to float free. In Norway, the situation was somewhat different. The Norwegian krone had not depreciated as much when Norway left the exchange rate mechanism. Norway therefore returned to a fixed exchange rate regime, although this regime gradually changed and in 2001 Norges Bank also formally adopted an inflation target and a new fiscal framework was introduced. So our two countries have had a similar strategy for monetary policy based on an inflation target and a floating exchange rate since 2001. During this period there have been frequent and deep contacts between our staff, and I am thankful for all that we at Sveriges Riksbank have learned from these exchanges of methodologies and other experiences. However, the emergence of Norway as an oil nation has made Norges Bank unique in many respects, not least in managing a sovereign wealth fund. Norges Bank is one of very few central banks charged with such a task. In fact, this fund is one of the largest investors on the Swedish stock exchange. When Norway became an oil nation in the 1970s, the country started its journey to become one of the richest nations in the world. We Swedes have some-times been a little envious of this, and perhaps even thought it was a shame we no longer have the union! Huge oil revenues also create major challenges, and many countries have not managed so well. But Norway has.