##osable household income in the coming years. total disposable income, according to our forecast, will continue to grow at a healthy rate in the years to come, despite rising interest rates. surveys from the national institute of economic research indicate that households expect rising interest rates in line with the riksbank ’ s repo rate forecast. this is probably one reason why saving among households is at a historically high level. that said, however, there are a number of uncertainty factors to consider. … but major differences among different groups the aggregated figures conceal vary large differences among different households, a fact substantiated by the riksbank ’ s analysis of data on individual households ’ debt. 13 we can categorise households based on their indebtedness. figure 8 shows how much an interest rate hike of 1 percentage point will subdue disposable income expressed as a percentage for all borrower households and for the most indebted. 14 for borrower households as a whole, disposable income will slow by just under 2 per cent. for the 10 per cent most indebted households, disposable income will slow by more than 6 per cent. the repo rate will be raised by about 1. 5 percentage points during the three - year forecast period. see k. blom and p. van santen, “ the indebtedness of swedish households – - update for 2017 ”, economic commentaries no. 6, 2017, sveriges riksbank. the calculations only capture the dampening effect of rising interest expenses on disposable household income, as the data material does not contain details on households ’ interest - bearing assets. see p. gustafsson, m. hesselman, and b. lagerwall ( 2017 ), “ how household cashflows and consumption are affected by higher interest rates? ”, staff memo, sveriges riksbank. 10 figure 8. major variation between different groups cashflow effect on disposable household income of a rate increase of 1 percentage point all borrower households ( dti ≈ 2. 6 ) 10 per cent most highly indebted ( dti ≈ 8. 7 ) note. per cent. refers to the average for each group. within each group, the figure in paranthesis refers to the average debt - to - income ( dti ) ratio. source : the riksbank this variation among households can also have a bearing

target for inflation, which the central bank then tried to attain by using the policy rate to affect aggregate demand. sweden also jumped onto this bandwagon and it proved to be a much more enduring solution than most people expected at the time. we have now lived with inflation targeting for almost twenty years. i am convinced that most people today would say that it has worked well on the whole – that it has fulfilled its purpose, and perhaps even exceeded expectations. but when one has got used to a particular system over a long period of time, it is fairly natural to start looking for faults and begin to question whether it might not be possible to make some modifications and improvements. and i do have the impression that inflation targeting in sweden has recently been criticised somewhat harder and somewhat more often than usual. for an interesting account of the situation at the riksbank at this time, see andersson, krister ( 2003 ), “ utformningen av inflationsmalet och den penningpolitiska analysramen ” ( the shaping of the inflation target and the framework for monetary policy analysis ), in lars jonung ( ed ), pa jakt efter ett nytt ankare ( looking for a new anchor ), sns forlag. bis central bankers ’ speeches today i intend to discuss and respond to three types of criticism that have been put forward. the first is the claim that the riksbank has an inbuilt tendency to set the interest rate too high and has thus caused unemployment to be unnecessarily high. the second criticism suggests that the target for monetary policy should be revised, by raising the inflation target and giving the riksbank a numerical target not just for inflation, but also for employment or unemployment. the third type of criticism is that monetary policy has recently been unclear and difficult to understand. inflation targeting ’ s most important contribution but before i move on to the different types of criticism, i would like to dwell a little longer on the situation twenty years ago. when analysing the inflation - targeting regime, i believe that it is important to remind oneself of the situation when it was introduced. why was there such strong support for defending the krona, even though it meant high interest rates in the middle of a recession? what were the problems policymakers were so anxious to resolve? as i have already mentioned, the recession in the early 1990s can be regarded as a setback following an excessive credit expansion, similar to the