Deemed a leaning-against-the-wind move out of concern for financial stability, and specifically the risk that maintaining a lower repo rate could have increased the already high ratio of household debt to disposable income, this policy stance has been questioned on the basis of a counterfactual analysis emphasising the macroeconomic costs in terms of below-target inflation and higher unemployment.” Another example is the Financial Times (2014): “Sweden’s central bank has been lambasted by critics for trying to use interest rates to combat signs of a housing bubble. It lifted rates in 2010 and 2011 as it publicly worried about what it saw as high household debt levels.” A further example here is Münchau (2014), who says that the Riksbank “raised interest rates to rein in a domestic housing bubble.”  9  Wolodarski (2014). 10  Wolodarski (2014). 4  BIS central bankers’ speeches  Something that has received considerable attention since the crisis is that a lot of things can happen with regard to expectations and risk-taking in an economy where interest rates are very low for a long period of time. Expectations regarding, for instance, how high interest rates will be in the future and how the housing market will develop in the years to come can become distorted, and risk-taking in the economy in general could increase in a way that may create problems.11 This is something that cannot be captured in a good way in the economic models available today.12 But this should not be an excuse to completely disregard such aspects.

Krugman, Paul (2014b), Apologizing to Japan. The Opinion Pages, The New York Times, October 30. Malmqvist, Peter (2014), Låg ränta bäddar för överhettning. (Low repo rate paves the way for overheating) Svenska Dagbladet Opinion, 19 July. Mian, Atif and Sufi, Amir (2014), House of Debt. University of Chicago Press. Mitelman, Henrik (2014), Nu blir Ingves börsens bästis. (Now Ingves is the stock market’s best friend) Dagens industri newspaper, 29 October. Münchau, Wolfgang (2014), What central banks should do to deal with bubbles. Column, Financial Times, July 13. OECD (2011), OECD Economic Outlook, No. 89, May 2011. Schularick, Moritz and Taylor Alan M. (2012), Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870–2008. American Economic Review 102(2). Smets, Frank (2013), Financial Stability and Monetary Policy: How Closely interlinked? Sveriges Riksbank Economic Review 2013:3. Jubilee issue. Stein, Jeremy C. (2013), Overheating in Credit Markets: Origins, Measurement, and Policy Responses. Speech at “Restoring Household Financial Stability after the Great Recession: Why Household Balance Sheets Matter”, research symposium sponsored by the Federal Reserve Bank of St. Louis, St. Louis, Missouri. 12  BIS central bankers’ speeches  Summers, Lawrence (2014), Washington Must Not Settle for Secular Stagnation. Financial Times, 5 January. Svenska Dagbladet (2014a), Krugman har fel om svensk bubbla. (Krugman is wrong about a Swedish bubble) Interview with Lars Svensson, SvD Näringsliv (business section of Svenska Dagbladet newspaper), 14 January. Svenska Dagbladet (2014b), ”Nollränta är som att kasta bensin på en brasa”.