A Riksbank equipped for the future

New but familiar toolbox

The monetary policy tools that have the best effect vary over time. But compared with the years before the financial crisis, ten years ago, we have now been working, and above all using the monetary policy toolbox, in a new way. Previously, adjustments of the policy rate were seen as the only tool. “These days, monetary policy also concerns changes in the Riksbank’s holdings of various financial assets,” Mr Ingves continued, “and these holdings will be an important part of monetary policy for a long time to come, even if the policy rate will remain an important instrument.”

This is also the situation in other countries, and the reasons for this are primarily international: the financial sector has grown and become more important, while the real interest rate has fallen. “These changes have not just entailed differences in how Swedish monetary policy is conducted. They also mean that we need to develop our way of discussing and perceiving monetary policy”, Mr Ingves said.

Crisis preparedness at central banks

Both the structural changes and crises over the last decade have forced all central banks to adopt new approaches that give greater weight to uncertainty and the understanding that the world is constantly changing. “We have had to develop our preparedness, capacity and flexibility to innovate, as the circumstances have demanded it,” Mr Ingves pointed out.

Monetary policy has thus changed and the new versions of old tools have made the Riksbank even better equipped to fulfil its tasks. But the objective of attaining the inflation target still remains.

“In a changing world, we stand constantly ready to develop new tools and make new kinds of analysis so that we can reach our inflation target,” Mr Ingves concluded.