Centre for Central Banking Studies, Handbook – No. 29, Bank of England. Heikensten, Lars and Vredin, Anders (1998), Inflationsmålet och den svenska penningpolitiken – erfarenheter och problem. [The inflation target and Swedish monetary policy – experiences and problems.] (In Swedish), Ekonomisk Debatt no. 8. Hökmark, Gunnar (2015), Därför har vi hög arbetslöshet. [Why we have high unemployment] (In Swedish), Debate article, Svenska Dagbladet, 31 July. IMF (2015), Monetary Policy and Financial Stability. IMF Staff Report. Jakobsson, Ulf (2015), Normer i en onormal tid. [Norms in an abnormal time] (In Swedish), Column, Affärsvärlden, 16 September. Krugman, Paul (2014), Inflation Targets Reconsidered. Essay presented at ECB Sintra Conference, May 2014. Kryvtsov, Oleksiy and Mendes, Rhys R. (2015), The Optimal Level of the Inflation Target: A Selective Review of the Literature and Outstanding Issues. Discussion Paper 2015-8, Bank of Canada. BIS central bankers’ speeches  11  Lacker, Jeffrey M. (2015), The Case Against Further Delay. Speech, 4 September. Federal Reserve Bank of Richmond. Mitelman, Henrik (2013), Dags sänka inflationsmålet. [Time to lower the inflation target] (In Swedish), Commentary, Dagens Industri, 4 December. Mitelman, Henrik (2015a), Riksbanken gör farligt experiment. [The Riksbank is conducting a dangerous experiment] (In Swedish), Commentary, Dagens Industri, 15 September. Mitelman, Henrik (2015b), Regeringen måste tygla Ingves. [The government must rein Ingves in] (In Swedish), Commentary, Dagens Industri, 8 October. The Riksbank (2010), The Riksbank removes the tolerance interval from its specified monetary policy target. Memorandum, Basis for Decision, 31 May 2010. http://www.riksbank.se/Upload/Dokument_riksbank/Kat_publicerat/Pressmeddelanden/2010/ nr27e_beslutsunderlag.pdf. The Riksbank (2015), Financial Infrastructure 2015.

We will see whether these expectations, which are very volatile, will be vindicated by the actual decisions of the governing Council as they will remain data driven and will reflect their assessment of the outlook. However, I believe it is fair and safe to say that the interest rates environment is likely to change after a long period of very low interest rates. As a supervisor, the current downside risks to growth and upside risks to inflation, and the associated perspective of a normalization of monetary policy of the euro area, make it all the more relevant to maintain credit and market risk management of banks, including exposures to vulnerable sectors, to leverage finance and to shocks in interest rates and credit spreads, a top SSM supervisory priority. 2.Financial stability situation: the risks associated with indirect exposures 1/4  BIS central bankers' speeches  Normalization of monetary policy will certainly come with a rise in interest rates. An orderly rise in interest rates as well as the direct exposures, which are small and concentrated, of euro-area financial intermediaries to Ukraine and Russia, are not likely to threaten financial stability. Through these direct exposures, the financial stability impact of the war has been well contained so far. However, the outlook is uncertain as vulnerabilities associated in particular with markets underpricing of risk, NFC high level of debt and exposure to cyber-attacks may unravel through indirect exposures and amplification mechanisms.