That is why when the Bank was fundamentally reformed after the crisis, the procedures and structures of the MPC were largely replicated in the Bank’s two new policy committees, the FPC and the PRC. Crucially, all the Bank’s committees have access to the Bank’s information and analysis, all are well-informed about each other’s reaction functions and all can coordinate their policies when appropriate. The Bank’s Committees are independent but not isolated. The second lesson of the past two decades has been the importance of the flexibility in flexible inflation targeting. While the inflation target applies at all times, the remit has always acknowledged that inflation may deviate temporarily from the target on account of shocks. Since 2013, it has explicitly recognised that in exceptional circumstances, bringing inflation back to target too rapidly could cause undesirable volatility in output and employment. In exceptional circumstances like today when the economy is facing profound structural change, the MPC can extend the horizon over which it returns inflation to target from above in order to balance the effects on jobs and activity. After all, even though monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU, it can influence how this hit to incomes is distributed between job losses and price rises. This brings me to my final point: while carefully circumscribed independence is highly effective in delivering price and financial stability, it cannot deliver lasting prosperity and it cannot solve broader societal challenges.

When inflation in Sweden is expected to be below target, the Riksbank conducts expansionary monetary policy. The aim is to push inflation up towards the target. At the same time, output and employment will also rise. But expansionary monetary policy also has other consequences. For example, rising asset prices lead to more uneven wealth distribution. In Sweden, however, this effect is mitigated by the fact that a comparatively large share of the wealth is  7  OECD (2019), Table 9.1, see also OECD (2020). 8 Ylva Hasselberg and I have written about this, see Hasselberg and Ohlsson (2016). 5 [6]  in collective pension funds. In many countries, there are no such funds. This hidden wealth is an aspect to consider when discussing the distributional effects of expansionary monetary policy. References Hasselberg, Y. and Ohlsson, H. (2016), “Collective wealth formation: Conflict and compromise in Sweden, 1950-2000”, in Hudson, P. and Tribe, K., ed., The contradictions of capital in the twenty-first century: The Piketty Opportunity, Agenda Publishing, pp. 109-130. Nilsson, C., Söderberg, J. and Vredin, A. (2014), “The significance of collective pension saving for the Swedish financial system”, Economic Commentaries 2014 (3), Sveriges Riksbank. OECD (2019), Pensions at a glance 2019: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/b6d3dcfc-en. OECD (2020), Pension Markets in Focus 2020, http://www.oecd.org/finance/pensionmarketsinfocus.htm. Ohlsson, H., Roine, J and Waldenström, D. (2020), “Inherited wealth over the path of development: Sweden, 1810–2016”, Journal of the European Economic Association 18 (3), pp. 1123-1157.