NCBs can often recruit and retain good staff by offering attractive salaries and other advantages. Second, Federal Reserve Board Chairman Bernanke 2 and others argue that information gathered in the conduct of supervision provides a necessary input for the monetary policy. Having updated knowledge about the financial system is also important if the central bank is requested to provide liquidity support in a crisis situation. Although such information can be summoned from a supervisory authority outside the NCB, the NCB will be in a better position if it is already familiar with the situation through its in-house supervision. A similar argument is that the central bank is often running or overseeing the large value payments system. Thus the central bank will be able to spot potential liquidity problems at an early stage and can take timely remedial action if it has the supervisory powers to do so. Arguments against retaining bank supervision in the NCB But there are also counterarguments to conducting supervision in the NCB. Some would reverse Bernanke’s argument and say that just because the NCB is responsible for monetary policy, payments system oversight and liquidity support in a crisis, it should not be responsible for daily supervision. An NCB with such responsibilities might run into a conflict between the objectives of monetary policy and of supervision. Simply put, the NCB might be tempted to keep interest rates excessively low in order to  2  Held at the Allied Social Science Association Annual Meeting, 9 January http://www.federalreserve.gov/BoardDocs/speeches/2007/20070105/default.htm  BIS Review 49/2007  2007.
Conclusion When I look back at monetary policy since the current monetary-policy regime, with a floating exchange rate and an inflation target, was introduced at the beginning of 1993, I think that it has on the whole functioned fairly well. One might possibly think that monetary policy was too tight in 1994–1995 when the Riksbank raised the repo rate at the same time as the budget consolidation work was holding back inflation. However, it was important to bring down inflation and inflation expectations to a much lower level than in the 1970s and 1980s. One might also think that the assumption of an unchanged repo rate that was used as a basis for the forecasts during the first years was too simple. On the other hand, one has to see this more as a part of the communication strategy that was being followed then. And it worked. Inflation expectations fell and have been established close to the target. I also think that monetary policy has worked well during the six years, 2006–2011, that I have been a member of the Riksbank’s Executive Board. CPI and CPIF inflation have on average been 1.7 and 1.8 per cent a year respectively. This is somewhat lower than the inflation target. However, given that the world has undergone the deepest recession since the 1930s during this period, it should nevertheless be regarded as a good result.