from time to time in the media. it has been claimed that the riksbank shows less concern about inflation moving outside the tolerance interval ’ s lower limit than it does about the upper limit being exceeded. that is not the case. a couple of years is too short a period on which to base arguments that deviations from the targeted rate are a sign that policy has not been symmetric. monetary policy work involves a lot of uncertainty, which is no doubt inevitable when the interest rate has to be set on the basis of forecasts that extend several years into the future. at present, moreover, assessments are particularly difficult so soon after the changeover to a low - inflation regime, with all that this may involve in the form of altered behaviour by households and firms. another complication is that in recent years, inflation throughout the world has been lower than expected. another aspect of this issue is the riksbank ’ s choice of a target variable. every conceivable indicator of inflation has its shortcomings and these have to be weighed against the advantages when choosing monetary policy ’ s target variable. the consumer price index ( cpi ) has the advantages of being well - known and established among economic agents and people in general as a measure of inflation. it also covers a large proportion of household consumption. these were central arguments when the cpi was chosen as the target variable in the beginning of 1993. a disadvantage with the cpi, however, is that it combines information about inflation ’ s underlying trend with transitory price movements. in the period in which the inflation target has been in force, transitory factors have had a marked effect on the cpi on a number of occasions. examples of such factors are tax changes ( most recently the increases to and subsequent cuts in property and tobacco taxes ) and fluctuations in interest rates ( which affect the cpi in the form of house mortgage expenditure ). during 1996 and 1997 in particular the cpi has been relatively markedly below not just the targeted rate but even the tolerance interval. this has faced the riksbank with educational problems. transitory effects on inflation ought to be a secondary consideration in monetary policy and be absorbed inside the tolerance interval of 1 – 3 per cent. that is one of the interval ’ s functions. and - 6provided it is a question of temporary price movements around a stable rate of inflation, there is no reason to counter such movements with repo rate adjustments. on the contrary, that might have a destabilising effect in the real

one can therefore argue that monetary policy should only have minor distributional effects, if any at all. the effects of an expansionary monetary policy during economic slumps should be counterbalanced by the opposite effects of a tight monetary policy during booms. it may of course be reasonable to take as a starting point that monetary policy is neutral in the long run. but there are factors that may point to a need to modulate this starting point. some research results indicate that the effects of expansionary and contractionary monetary policy are not necessarily symmetrical. 4 there are also mechanisms that make the risk of staying unemployed increase the longer one is unemployed. add to this that the income profile over the life cycle improves considerably if one has a job. this could mean that there are motives for conducting a relatively more offensive monetary policy in economic recessions. but here more research is needed to gain a deeper insight into the causes and scope of this type of persistence effects on unemployment and what these effects mean for monetary policy. monetary policy affects incomes from different sources the effects of monetary policy on income and wealth distribution are in other words rather difficult to disentangle. but let us look at some different ways in which the expansionary monetary policy conducted in recent years may have affected the income distribution. an appropriate starting point could be the functional income distribution of gdp. as we know, gdp can be measured from different sides, for instance as the total of all factor income. somewhat simplified, the income comes from two main sources : remuneration to the labour force in the form of wages and other benefits and remuneration to capital in the form of yield and profits. both of these types of remuneration have increased over the past three years, and gdp has increased by a good three per cent on average in 4 see, for instance, oecd ( 2015 ) and furceri et al. ( 2016 ). 6 real terms. 5 but the question is how the growing incomes have been distributed among households. households differ with regard to the size of the income they receive from different sources. in general, labour income is in relative terms the most important source of income for households in the lower and middle parts of the income distribution, while capital income has the most significance for those at the top – particularly the very top – of the distribution. as monetary policy affects wages and capital income in different ways, the overall effect may differ from one household to the next. it is this channel from monetary policy via the composition