has swedish monetary policy been conducted in recent years? swedish monetary policy strategy entails stabilising inflation around the target and striving to stabilise production and employment around paths that are sustainable in the long term. if we look back two years, to the period before the april 2014 meeting, cpif inflation had been around 1 per cent for some time, which is too low given that the riksbank wishes to uphold confidence in the inflation target of 2 per cent as an anchor for price - setting and wage - formation. another observation from april 2014 was that the more long - run inflation expectations had fallen below the 2 per cent level. it became increasingly clear over the course of the year that further monetary policy stimulation was needed. six months later, in autumn 2014, after rate cuts totalling 75 basis points, the situation became critical as a result of the halving of the oil price in usd. this further dampened the already low inflation, although lower energy prices also benefit demand. on top of this, there were clear signals that the ecb was preparing a powerful stimulation package that would come into operation in spring 2015. measures taken to improve the prospects for our trading partners are of course also positive for the swedish economy, but if the negative interest rate differential between sweden and the rest of the world were to increase, it could contribute to a strengthening of the krona. this would make it even more difficult for us to attain the inflation target. at the beginning of 2015, the initial situation for the riksbank was problematic. the risks of waiting to see what happened were assessed as greater than those connected to being proactive, as inflation had been low for a long time and inflation expectations were moving in bis central bankers ’ speeches the wrong direction. if monetary policy had not been made more expansionary, there was a risk that inflation expectations in the corporate and household sectors would fall further and i did not see this is a path to higher and more normal interest rates. the executive board was agreed that further stimulation was necessary. starting from the february meeting, the repo rate was cut below zero and the first of a series of asset purchase programmes was begun. furthermore, we signalled that there was a possibility of foreign exchange interventions if the krona appreciation already forecast were so strong and rapid that it jeopardised the upturn in inflation. we deliberately increased our focus on the development of short - run inflation, as we had a low tolerance of poor outcomes. what considerations

explain the slowdown but that these effects are transitory. 1 see deputy governor henry ohlsson ’ s speech on 18 march 2016 “ decision today, consequences far into the future ”, for a longer review. bis central bankers ’ speeches lower real interest rates and inflation but it is not merely real interest rates that have fallen. in recent years, inflation has also shown a downward trend. this trend began later than the decline in real interest rates, but swedish inflation began to fall slightly before that in other western countries such as the united states and the euro area. the most recent downturn in inflation in the euro area can to some extent be explained by the fall in energy prices. however, underlying inflation has also fallen in the wake of both the banking crisis and the euro crisis. it is necessary to take into account the decline in both real interest rates and inflation in the monetary policy deliberations. the fundamental reasoning regarding the stabilisation ability of monetary policy with a floating exchange rate is based on the assessment of a normal nominal interest rate, simply described as an interval for a nominal interest rate that neither speeds up nor slows down the economy. to estimate how high the normal nominal interest rate should be, we look at the real interest rate and add to this the inflation target. if the real interest rate is 2 per cent and the inflation target is 2 per cent, then the nominal interest rate should be around 4 per cent. if the real interest rate rises to 3 per cent, and the inflation target remains unchanged at 2 per cent, the nominal interest rate will be 5 per cent, and so on. but as i have just shown, developments are instead showing a downward trend. lower real interest rates and lower inflation and inflation expectations are pushing the nominal interest rate downwards. this means that the central bank has to take stronger action for monetary policy to have a stimulating effect. some important questions are raised here : what are the fall in real interest rates and the downturn in inflation due to? are these temporary or permanent changes? are the central banks over interpreting their price stability task or have they not done sufficient to cure the low inflation? some say that all things bad are mostly the fault of the central banks. i believe that part of the intensive debate on monetary policy conducted both here in sweden and abroad is due to us economists tending to have different answers to these questions. these answers in turn affect the opinions on what is the best policy in both the long and the short term. how