and real government bonds – in conjunction with the announcements of repo rate cuts and bond purchases that came as surprises. standing prepared to make monetary policy more expansionary inflation and inflation expectations are now higher than they were one year ago. but, over the autumn, the development of inflation was weaker than we predicted and the rise in inflation is still largely due to the krona being weak. if the rise in inflation is broken, confidence in the inflation target may be weakened. we are therefore prepared to do even more if it proves necessary to safeguard the inflation target. we still have many possible measures in our toolbox. experiences from the past year suggest that cuts to the repo rate and repo rate path also work below zero and that purchases of securities form a good complement. we can do more in this style if we deem that inflation prospects are changing. loans to companies via the banks are another possibility that i have already mentioned. in addition, the riksbank is prepared to carry out currency interventions if the exchange rate develops in a way that is not compatible with a rise in inflation to two per cent. the aim of this would not be to influence the long - run krona rate, but to counteract an overly rapid strengthening before inflation has stabilised around 2 per cent. i hope that my comments so far have made clear that confidence in the inflation target has been given the highest priority by the riksbank and that monetary policy has contributed towards the favourable development of the real economy. at the same time, since 2012, we have been careful to point out that a situation with low interest rates over a long period of time may create imbalances on the financial markets and on the housing market. we have therefore clearly communicated to the government and other authorities that it is important to use various measures to limit risk - taking in the economy. my assessment so far is that significantly de rezende, r. b., kjellberg, d. and tysklind, o., “ effects of the riksbank ’ s government bond purchases on financial prices ”, economic commentary no. 13, 2015, sveriges riksbank. bis central bankers ’ speeches more commitment will be required to obtain a functioning housing market in sweden and to reduce the risks of household indebtedness. the risk otherwise is that we will create new problems that may lead to low growth further on and new difficulties for monetary policy to reach the inflation target. i am concerned about sweden

. investments and new recruitments are facilitated by companies ’ ability to make a reasonably good prediction of price and wage cost increases over the lifetime of an investment. the less uncertainty there is over future price developments, the easier it also becomes to agree on conditions for various contracts, not least the wage agreements negotiated by the labour market parties. all in all, it is thus not unreasonable to consider that inflation targeting has contributed towards the higher average growth we have experienced over the two decades since targeting was introduced, as compared with the preceding period. the swedish inflation target was announced in january 1993 and started to be applied in 1995. for a more indepth review of the relationship with academic research and countries that had previously adopted inflation targeting, see berg, c., “ experience of inflation targeting in 20 countries ”, sveriges riksbank economic review 2005 : 1, sveriges riksbank. bis central bankers ’ speeches it is important that inflation expectations are not too low there is consequently a lot to be gained from having low, stable and predictable inflation. but it is also important that expectations of future inflation are not too low. one reason for this is that inflation allows wages to develop more weakly in certain areas without requiring nominal wages to be cut. this means that unemployment can be avoided when changes occur that reduce the demand for certain types of knowledge, skill and experience. however, inflation expectations also affect the strength of the riksbank ’ s primary monetary policy weapon – the repo rate – and thereby the riksbank ’ s ability to stabilise the swedish economy and lead it out of crises. this is a product of the way inflation expectations affect real interest rates. in the same way as the figures for gdp growth we usually discuss refer to real growth, which is to say growth adjusted for inflation, there is namely reason to adjust interest rates in the economy for inflation – in particular, to determine how much stimulus monetary policy is supplying. there are good reasons to subtract the effects of inflation on debts and saving. for example, a loan for an investment becomes less burdensome to repay the more the price of the goods the borrower is selling has increased over the period in question. and the lender, correspondingly, has reason to consider how much the money is worth when the loan is eventually repaid. another way of putting it is that those borrowing and lending must consider how much of the amount lent they expect to be ‘ eaten up ’ by inflation. the economically