But a positive interpretation is that if this is something central banks nevertheless have at the back of their minds, the risk of excessive interest rate hikes in individual countries is reduced. Easier communication when inflation is too high… The conditions are also favourable in terms of communication. As I stated earlier, it was not possible to use monetary policy for macro-stabilisation purposes in Sweden in the 1970s and 1980s, because the interest rate was directed at defending the fixed exchange rate. There was therefore, in principle, no monetary policy communication either. However, compared with the period we have gone through more recently, where it has been difficult to reach the inflation target from below, communication about monetary policy has in a way become easier. Everyone agrees that high inflation is a bad thing. You simply get fewer goods for the same amount of money when you go shopping and in that way you become poorer. This is something that is evident in everyone’s day-to-day life. The fact that it is quite easy to explain that high inflation is problematic does not mean that everyone will be in favour of the interest rate hikes that are necessary to deal with the problem. In addition, if a period of weak economic development is required for inflation to return to the target, a specific challenge arises: One needs to explain that this is preferable to a development in which the high inflation rate will instead be lasting.
At the same time, the regulatory framework for the banks’ operations was improved significantly. Now we have a banking system that primarily serves domestic households and businesses and, in terms of total assets relative to GDP, is about 15% of its precrisis size. As can be seen in their high capital adequacy ratios and sound liquidity position, the banks are quite resilient. Their capital ratios have fallen in recent years as a result of dividend payments, and it can be said that there was scope for such a reduction. But now their capital ratios are much closer to the Financial Supervisory Authority’s capital requirements, and under current conditions of elevated economic uncertainty, it would be imprudent to lower them much more with dividend payments. In this context, it is important to bear in mind that the current capital requirements also include buffers that can be used without the banks being deemed to have failed. These capital buffers are a sort of cushion, and if they are tapped, resilienceenhancing measures such as restrictions on payments of dividends and bonuses will be adopted. Furthermore, the countercyclical capital buffer can be lowered very quickly if conditions warrant it, although it has been decided to increase it to 2% in the coming term. On the whole, the 2008 IMF programme objective of rebuilding the banking system on firmer foundations was met successfully.