and the percentage of people receiving benefit from their unemployment fund is twice as high in some occupational groups as in others. the fact that these differences remain over long periods, even when there is a shortage of skilled labour, suggests that the labour market doesn ’ t function as well as might be desired. the problems in the swedish labour market are also underlined by the fact that open unemployment barely came down to 4 per cent when economic activity was at its strongest a couple of years ago. target deviations and employment how the riksbank works so, even though monetary policy cannot be expected to have any tangible impact on employment in the long term, short - term effects can arise. this is because a policy aimed at attaining the inflation target may entail changes in interest rates, which temporarily affect demand so that employment rises or falls. the limit for how long and how much monetary policy can raise employment is determined in practice by the economy ’ s long - term growth potential, which in turn depends partly on how well the labour market functions. when we conduct monetary policy with an inflation target, this means under normal circumstances that we can help stabilise actual output around its long - term potential. if the riksbank is to be able to take any account of employment in the short run, however, it is particularly vital that economic agents have confidence in monetary policy and the inflation target ; this is a clear lesson from the situation in the 1970s and 1980s. as you know, the principal instrument we use to try to meet the inflation target is the repo rate. we set this rate with the aid of forecasts of inflation a couple of years ahead. naturally, a lot can change in the space of two years so that our forecasts do not prove accurate. we can make up for this to some extent by being able to change the rate in the light of new information. but we can ’ t compensate entirely for such events, of course. sometimes, developments affect inflation at very short notice : a sharp hike in electricity prices, an equity price bubble that bursts, a war that heightens unease in the world and curbs demand, etc. in such cases it ’ s not possible to prevent inflation from deviating from the target, and even if it was possible to lessen the deviations, it may require such sharp movements in interest rates and such substantial effects on the economy that it would not seem desirable or reasonable. when inflation deviates from the target, we normally try to bring it back

christine lagarde : welcome address marking the change in office of the president of the deutsche bundesbank welcome address by ms christine lagarde, president of the european central bank, at a virtual ceremony marking the change of office of the president of the bundesbank, 11 january 2022. * * * it is a pleasure to be here today to speak with you. this ceremony marks an important moment of transition for the deutsche bundesbank. we say goodbye to a good friend, jens, after more than ten successful years at the helm of this proud institution. and we welcome joachim as the bundesbank ’ s new president. the bundesbank is no stranger to moments of transition. it has presided over some remarkable changes in germany ’ s economy since its establishment back in august 1957. that includes implementing the monetary union as part of german reunification in 1990. overnight, the purchasing power of the deutsche mark could be something enjoyed by all germans. and it also includes introducing germany to the euro. indeed, this month we celebrate the 20th anniversary of euro banknotes and coins becoming part of our daily lives. 1 but amid all these transitions, one element has remained constant throughout. the bundesbank has remained faithful to its mandate of maintaining price stability. this has been the key to the bundesbank ’ s success – and we have inherited that rich tradition at the ecb. price stability is the north star that has helped us navigate through some extremely turbulent times. we have faced a series of crises in the euro ’ s short life, ranging from the great financial crisis to the sovereign debt crisis, and to the coronavirus pandemic. we have faced periods of too - high inflation and too - low inflation. but throughout, our actions have been guided by delivering on our mandate. yet the global economy never stands still – and central banks have to adapt if they are to stay faithful to their mandates in changing times. as goethe, a son of frankfurt, once wrote : “ life belongs to the living, and whoever lives must be prepared for change. ” that is why the conclusion of our strategy review last year was so important. it has given us a policy framework that is fit to tackle new challenges as and when they arise. we now have a 2 % inflation target that is simple and symmetric. we have a playbook for how to react when inflation deviates from our target in both directions. and we have clarity on the tools in our monetary policy toolbox and how