stefan ingves : the monetary policy landscape in a financial crisis speech by mr stefan ingves, governor of the sveriges riksbank, at the swedish economics association, stockholm, 31 march 2009. * * * introduction " the monetary policy landscape in a financial crisis " is the theme of my speech this time. i thought for once that i would begin by showing you a picture. the slide shows an oil painting that was done in 1842 by the english artist william turner. 1 it is called ” snow storm – steam - boat off a harbour's mouth ”. it is part of the collection at the tate gallery in london. the only thing you need to know about the painting just now is that turner used a very special technique. he built up the picture gradually by painting several thin, semi - transparent layers on top of each other. he then added somewhat thicker, more pastose sections. as you can see, this layer - by - layer technique gave his paintings a special lustre and a special atmosphere. we would probably say that the atmosphere in this painting is dramatic. turner's technique can also act as a starting point for a description of the situation today. reality is made up of different layers. every layer that is added or peeled away reveals a partly new landscape. we can compare the financial crisis to the snow storm in turner's painting. in order to paint the picture of the complete storm we need to begin with a layer that describes the macroeconomic preconditions, the macroeconomic landscape. then comes a layer that describes the financial landscape. this consists of financial players, institutions, markets and joseph mallord william turner ( 1775 – 1851 ), british artist most famous for his romantic landscape paintings, whose style can be said to have paved the way for impressionism. instruments. over this there is yet another layer that describes the regulatory landscape, that is the special legislation, regulations and supervisory arrangements that cover the activities of financial companies. somewhere in the middle of the picture, symbolised by the steam boat that is trying to navigate the right course through the snow storm, we have the riksbank which is fighting to both meet the inflation target and safeguard the stability of the payment system. for the riksbank, as for steam boats at sea, the room for manoeuvre is determined by the conditions in the surrounding landscape. we have to understand how the weather, visibility and other prevailing factors affect our chances of steering the boat in the right direction

lars heikensten : on clarity and flexibility speech by mr lars heikensten, first deputy governor of the sveriges riksbank, at a center for business and policy studies ( sns ) seminar held in stockholm on 9 may 2001. * * * let me begin by saying that i welcome this opportunity for a fundamental discussion on the way monetary policy is formulated. the background to today's discussion consists of a number of contributions to the debate in which it has been asserted in somewhat differing ways that the way we have chosen to formulate monetary policy is not sufficiently flexible. our critics are of the opinion that by tying ourselves down to an inflation target of 2 per cent we risk allowing unacceptably high domestic inflation. and that we risk strengthening " bubbles " in asset prices. it has also sometimes been intimated, in so many words, that the way we have chosen to formulate policy is one explanation for the very weak exchange rate. furthermore, in this debate, it has also been suggested that we should adopt less specific inflation targets, similar to those of the european central bank ( ecb ) and its american counterpart – the federal reserve. the debate has arisen primarily in three different contexts. how deregulation should be handled, to what extent asset prices should be taken into account, and the role the krona has to play in this analysis. the mainstay of my argument is that there are no simple solutions to any of these problems. what is needed is an empirical assessment from case to case. i think that monetary policy does have the flexibility needed to deal with the problems with which we are faced. at the same time, clarity in the formulation of objectives brings advantages. the basis of the way in which the riksbank evaluates the future path of inflation and makes decisions on the repo rate is the guiding rule, which we have followed for a number of years. according to this simple rule, policy is based on an inflation forecast with a horizon of several years. if, in one or two years'time, inflation exceeds the target, we have said that there is normally a case for raising interest rates and vice versa. but there can be reasons for deviating from this rule. some of these reasons are given in the clarification issued by the executive board of the riksbank when it took office. other reasons have been presented in various speeches. perhaps i should also say right at the beginning that what i am going to