Remember, the important thing here is that CPI inflation is 2 per cent. So the Riksbank should actually have raised rather than cut the repo rate. The direct effect would then have been that CPI inflation would have been higher through the effects on the interest-expenditure component of the CPI. Of course, this would also have had a dampening effect on activity in the economy and on the inflation rate that is not affected directly by changes in mortgage rates, namely CPIF inflation. But this could have been compensated with more and larger interest rate increases and CPI inflation could thus have been kept at 2 per cent. CPIF inflation would then fall increasingly, but this would not matter as the calculation assumes that it is solely the average CPI inflation rate that creates the unnecessary unemployment. Before anyone thinks that I have gone over to the dark side, let me say that this would of course have been an absurd and destructive monetary policy. But it illustrates the difficulty of interpreting the results of calculations that solely focus on the average of CPI inflation. Söderström and Vredin (2013) discuss this, among other things, in an analysis of inflation, unemployment and monetary policy. One conclusion of their analysis is that the link between CPI inflation and unemployment has many causes and that it in itself therefore does not give much guidance as to how well monetary policy has been conducted.
It is also precisely these questions that have been discussed in the general debate on the role of monetary policy in this context. I therefore intend to discuss these questions one by one and in relative detail. Can the repo rate affect housing prices and lending? It is probably true that the effect of a typical change in the policy rate on housing prices and lending to households is on average not very large. In addition, the policy rate is a blunt instrument when it comes to influencing housing prices and lending, as it is an interest rate that applies to the whole economy. This is why more specific tools, what are known as macroprudential tools, are generally perceived as more appropriate than the policy rate for counteracting this type of specific imbalances. But the effect of the policy rate most likely varies quite substantially depending on the circumstances prevailing at a specific time. In some situations it may be enough to make fairly limited increases to subdue an overly rapid upswing in the housing market, for instance, if the central bank combines these increases with communication emphasising that current developments are perceived as cause for concern.13 Small interest rate increases then function more as a concrete "reminder" that the central bank is concerned over  10  King (2012), p. 12. 11  IMF (2013), p. 3. 12  See, for example Svensson (2012).