In general, central banks do not have targets either for house prices or household debt. A rapid surge in house prices or rising lending may, however, signal an imminent financial crisis which could affect future inflation and resource utilisation. Hence, under certain circumstances, also taking account of house prices and household indebtedness in monetary policy decisions is necessary. The extent to which this should be done is, of course, a matter of judgement affected by several factors. For instance, it depends on the other variables currently being taken into account, and the shocks expected ahead. The housing market is also an important part of the monetary policy transmission mechanism. The house prices thus also contribute important information about which shocks are driving the economic development. On the whole, I do not believe that the flexible inflation target policy conducted by the Riksbank since the mid-1990s, with price stability as the overriding target, needs changing. However, monetary policy must to a greater extent lean against the wind and take greater account of financial stability. Macroprudential policy provides financial stability policy with a new focus The emergence of macroprudential policy as a new policy area involves a far-reaching change in the preventive work of financial stability policy.3 Macroprudential policy is about limiting systemic risks from a systemic perspective. It is about analysing the links between the various agents in the financial system and the relationship over time between the financial system and the macro economy.

Unemployment will depend in part on labour market policy, structural policy and institutional arrangements in the labour market. Industry structure - or the relative size of the internationally exposed and the sheltered sectors - is determined by a combination of two factors. First, industry structure will be affected by developments in production technology in the two sectors. Second, industry structure will be affected by how the increase in demand is spread across sectors. The use of petroleum revenues will play a decisive role. Monetary policy will not over time affect industry structure. The relationship between inflation and long-term unemployment is often presented as a vertical curve. In other words, we cannot choose a lower level of unemployment by allowing higher inflation. Attempts to reduce unemployment by allowing higher inflation can easily lead the economy into a situation with accelerating wage and price inflation. This is not sustainable. The real economic costs of bringing high and increasing inflation under control are considerable. A temporary rise in unemployment will be inevitable. Gradually, as the share of the long-term unemployed increases, there is a risk that the relationship between wage growth and unemployment changes. A higher level of unemployment may be the result in the long term. The labour supply will be reduced if unemployment leads to increased flows out of the labour market and into social security schemes. We experienced high inflation in the 1970s and 1980s. This period was also marked by considerable fluctuations in output and employment, followed by a lengthy period of high unemployment.