Another very important change was the creation of a fiscal policy framework with an amended budget process. This framework and the new process aimed to get a grip on the evolution of public expenditures while also leading  1  The Economic Commission (1993). 2  A debate about this had been taking place for a while at that point. The Swedish Centre for Business and Policy Studies (SNS) had been advocating a so-called norm-based stabilisation policy since 1985, see Heikensten and Vredin (2012) for an overview. BIS central bankers’ speeches  1  to an average surplus in terms of net lending. The overall aim was to ensure that fiscal policy would have the desired long-term orientation. Flexible inflation targeting preferable – but improvements not ruled out But even though these and other changes have made the Swedish economy more reliable and resilient to shocks, we too have been affected by the events of the past few years. The global financial crisis and surprisingly low inflation have meant that a number of previously accepted truths have begun to be called into question, and led to a debate about whether the economic policy framework developed prior to the financial crisis should be modified or potentially even replaced. My view here is completely clear: it is important for us to think very carefully before we make any comprehensive changes to the Swedish economic policy frameworks.
In other countries, for example the United States and Norway, costs for owner-occupied housing are approximated to the cost for renting a comparable property – and this is far less affected by interest rate changes. In the euro area and the United Kingdom, the target is formulated in terms of the HICP index (harmonised index for consumer prices) which does not include costs for owner-occupied housing, only operating costs.11 As Swedish CPI inflation has this characteristic, the Riksbank has, since the introduction of the inflation target, calculated several different measures of inflation and has also regularly let inflation indices other than the CPI guide interest rate decisions. The price index which has played the biggest role in recent years is the CPIF, or the CPI with a fixed interest rate. Unlike the CPI, the CPIF is not directly affected by changes in mortgage rates. CPIF inflation, with energy prices also discounted at times, has functioned as a “steering” variable in such a way that the Riksbank has normally aimed for it to be close to 2 per cent within the forecasting horizon. Major interest rate changes lead to substantial and long-term effects on the CPI Despite this, the target has been formulated in terms of the CPI. As interest rates sometimes go up and sometimes down, the idea has been that the differences in inflation according to the CPI and the CPIF will level out over time.