Scope for major differences, despite a common strategy Even if there is agreement on the strategy for monetary policy, there is, of course, considerable scope for differences in assessments of where the interest rate should be in each situation. In the first place, the Executive Board can make different assessments of the most probable price tendency. As we know, economics is not an exact science and forecasts of prices and growth potential always rest on many assessments of an enormous mass of information and correlations. Models can never capture the complexity of the economy and how people’s economic decisions interact and must therefore always be regarded as one of many aids in assessments. The Riksbank uses a lot of different approaches and indicators to make assessments. The focus of the Riksbank’s analysis has been until now on the real economy and how it affects price trends. In many areas, we have come further than other central banks, while we have not come so far as regards the analysis of different financial aggregates and their linkage with inflation and real demand. An endeavour has certainly been made to take into account information provided by the development of the quantity of money and growth of credit. However, we have not for instance developed methods that can give guidance as to the level of indebtedness and the quantity of money that is compatible with the long-term sustainable growth of the economy on the basis of the inflation target.

Different economic policies and policy areas, such as fiscal policy, labor market policy, structural policies to improve competition, etc., can be distinguished according to their objectives, the policy instruments that are suitable for achieving the objectives, and the authority or authorities controlling the instruments and responsible for achieving the objectives. Monetary policy in the form of flexible inflation targeting has the objective of stabilizing both inflation around the inflation target and resource utilization around a normal level. The suitable instruments are under normal circumstances the policy rate and communication, including possibly a published policy-rate path and a forecast of inflation and the real economy. In times of crisis, as we have seen during the current crisis, other more unconventional instruments can be used, such as fixed-rate lending at longer maturities, asset purchases and foreign-exchange intervention to prevent currency appreciation. The authority responsible for monetary policy is typically the central bank. Financial-stability policy has the objective of maintaining or promoting financial stability. The available instruments are under normal circumstances supervision, regulation and financialstability reports with analyses and leading indicators that may provide early warnings of stability threats. In times of crisis, there are instruments such as lending of last resort, variable-rate lending at longer maturities, special resolution regimes for financial firms in trouble, government capital injections and so forth. The responsible authority or authorities vary across countries. In some countries it is the central bank, in other countries there is a separate financial supervisory authority, sometimes the responsibility is shared between different institutions.