According to the government bill, the monetary policy instruments should only be used to maintain price stability and they should only be used to prevent a financial crisis if this threatens the objective of price stability. 8  A further motive [for a clear objective] is that a far-reaching delegation of monetary policy should be combined with follow-ups and controls. The Riksdag as the Riksbank’s principal must therefore have the possibility to evaluate its activities on the basis of an objective that is set for the activities.” (Government bill 1997/98:40 p. 52) 8  “The Riksbank shall also promote a safe and efficient payment system. This is a fundamental task for the Riksbank and not an actual objective for its activities. The corresponding task applies to the ESCB. It could be claimed that this task could come into conflict with the Riksbank’s objective of price stability, as the Riksbank could in certain situations use the policy rate to avoid a crisis in the banking system. However, the monetary policy instruments shall, in accordance with the government’s proposal, only be used to maintain price stability. The Riksbank has at its disposal other instruments for managing such situations, for instance, the possibility to grant liquidity assistance, as lender of last resort. At the same time, there may be situations in which a crisis in the payment system threatens to jeopardise the price stability target.
One argument that has been put forward for trying to slow down an increase in housing prices is that future falls in housing prices would have negative effects on future inflation and the real economy. However, Claussen, Jonsson and Lagerwall show that the macroeconomic effects of a 20 per cent fall in housing prices would be relatively limited and possible to counteract by adopting a more expansionary monetary policy. This is shown in more detail in the minutes of the monetary policy meeting held in June 2010, when I presented simulations of how expansionary monetary policy can stabilise CPIF inflation and GDP growth following such a fall in housing prices (Sveriges Riksbank 2010). According to Finansinspektionen’s (the Swedish financial supervisory authority) report on the Swedish mortgage market (Finansinspektionen 2012), Swedish mortgages do not constitute any threat to financial stability at present. Mortgage borrowers have a good debt-servicing ability and pass stringent stress tests, credit assessments are thorough, the loan-to-value ratio for new mortgages is declining and the loan-to-value ceiling appears to be effective. If the growth in mortgages or the loan-to-value ratio were to develop in a problematic way further ahead, it is possible to lower the mortgage cap. This is a better means of influencing growth in mortgages and loan-to-value ratios than using the policy rate.