In some countries that have experienced bank crises, the central government has intervened and saved the bank owners’ capital contributions. In my opinion, this is both unfortunate and inappropriate and creates the wrong incentives for the future. Like the banks, the supervisory authorities and legislators lacked insight into what risks were actually associated with banking activities in a competitive environment. This meant that the supervision remained largely as it had been before, with unchanged resources, despite a drastic change in conditions. There was neither the competence nor the instruments needed to assess what risks were arising within the banks. The main emphasis was placed on the banks reporting their positions correctly rather than on analysing the underlying risks. There were few economists within the Swedish Financial Supervisory Authority, but a lot of legal advisers. What was really needed was a suitable mixture of the two; and also other specialists in various forms of banking activities. Our experiences of the crisis mean that I cannot emphasise strongly enough the importance of having carefully-drawn up legislation in place that can provide effective support for the supervision to be conducted. As well as support for potential crisis management. The legislation should provide the supervisory authority with obligations and powers of authority to intervene at an early stage against institutions that do not meet the requirements set, to avoid problems in one institution becoming magnified and spreading to others. The intervention by the authorities must be predictable and objective, so that the banks are not forced to operate in uncertainty.

Inflation has also rebounded quite strongly, with headline inflation at 3.4% in September, according to the flash estimate, and inflation excluding energy and food at 1.9%. This rebound fuels a lively public debate, but we should be vigilant without being feverish: clearly, there is no such thing as stagflation. This rebound results mainly from several temporary factors, as already stressed by my ECB colleagues Philip Lanei and Isabel Schnabelii. Part of the rebound just offsets exceptionally low prices during the Covid crisis in 2020. Compared to September 2019, consumption prices have only increased by 1.5% on an annual basis, and prices excluding energy and food by 1.0%. A second cause can be attributed to the strong rebound of energy prices, in particular oil and natural gas, the latter having also a direct impact on wholesale electricity prices. It is of course very hard to forecast prices, but futures markets for natural gas are currently pricing a sharp decrease in the second quarter of 2022, once the current high demand related to stock replenishment and the winter season is over. A third cause is the global shift from the consumption of services to the consumption of goods as the global economy reopened while health restrictions or behavioural changes still affect the service sector. With low inventories, severe supply bottlenecks in some key sectors such as shipping or semi-conductors, and shortages, supply-chains are struggling to serve this demand. The resulting increase in the price of raw materials and industrial inputs has been transmitted to manufactured goods prices.