25  By the long-run sustainable rate of unemployment, also known as the long-run equilibrium rate of unemployment, I refer to the rate of unemployment in steady state, where the economy is in a state of what is known as balanced growth, the effect of all shocks has waned and expectations are fulfilled. This should not be confused with other more short-run equilibrium concepts. According to Rogerson (1997), this is the only equilibrium concept for unemployment that is well-defined. The Ministry of Finance’s (2011) assessment from April 2011 entails a long-run sustainable rate of unemployment of 5 per cent. The National Institute of Economic Research’s (2011) assessment from December 2011 entails a long-run sustainable rate of unemployment of 5.8 per cent. The Riksbank's (2012b) assessment from July 2012 lies in an interval with a midpoint of 6.25 per cent. My own assessment is that the Riksbank’s midpoint is an overestimate of around 0.75 percentage points and that long-run sustainable rate of unemployment is thus around 5.5 per cent (Sveriges Riksbank 2012a, appendix). 26  In Svensson (2011b) I note that the forecasts for inflation and unemployment looked similar for Sweden and the United States in summer 2010 and that in this situation the Federal Reserve held its policy rate close to zero and began to prepare QE2, the second round of its quantitative easing, while the Riksbank began to raise its policy rate. 12  BIS central bankers’ speeches  How high is the cost of the current policy?
Moreover, in my opinion it is not clear that the current level of household debt entails any risks to financial stability or the macro economy. But once again – potential risks should and can be managed using other means than monetary policy. Monetary policy should instead be aimed at maintaining price stability and attaining the lowest sustainable rate of unemployment. Let me conclude on a positive note. Previously, as I see it, it was not so easy to determine where the main dividing line went in views on monetary policy, and the discussion therefore tended to have less focus than it ought to. Recently, the dividing line has become clearer, which is good. A situation that I nevertheless believe there is fairly considerable agreement on is that there are other tools than the repo rate better suited to managing household debt and promoting financial stability. Monetary policy should be “the last line of defence”, not the first line. As I noted earlier, a potential framework for macroprudential policy is being investigated. Once a framework is in place, monetary policy will be “unburdened” in that one of the tasks that some people feel it should carry out will be removed – namely to prevent a substantial buildup of debt in the household sector. This means that the differences of opinion on monetary policy should decline considerably. And hopefully this will happen fairly soon. In Sweden we have deliberately chosen to have a high degree of openness regarding monetary policy.