. if the intention is that prices should increase by 2 per cent, but over a period of time they have increased by less than this, the rate of price increase must be higher than 2 per cent for a period in order to return to the original price level path. the advantages and disadvantages of a price level target have been debated considerably in research and are also discussed in the evaluation. one example of an advantage of having a price level target is that it provides more guidance than an inflation target with regard to the price level far into the future. as i understand it, the authors do not appear to be advocating a pure price level target, rather some form of hybrid. in concrete terms, this means, if i interpret rightly, that the riksbank should retain its inflation target but still to some extent compensate for the deviations from target that have arisen by deliberately allowing inflation to go above the target for a time. here i can imagine a number of practical objections. i believe, for instance, that it would not be an easy task to convey the message to the general public that as inflation had been, say, below target for a period of time, the riksbank would endeavour to bring inflation up to, say, around 3 per cent for a period of perhaps a year. in my opinion, this could lead to considerable confusion with regard to the status of the 2 per cent target. there is a risk that it could be perceived as the riksbank beginning to work with inflation targets that vary over time, which could also be said to be the case. i believe that in this type of world it would be more difficult to anchor expectations of future inflation. the authors claim that this method of conducting monetary policy would only entail a minor change in the current policy. i do not really agree with this. i consider that it would be a fairly major change in a system that, all in all, has been proved to work well. it would in any case be a much greater change than the ones we have made so far, such as abandoning the assumption of an unchanged repo rate and our earlier simple policy rule. bearing in mind that the riksbank, as is also noted in the report, has not found it entirely easy to communicate these relatively limited changes in its monetary policy system, it is somewhat surprising that the authors consider this change as minor. however, i am not saying that changes in the monetary policy strategy, for instance in the way suggested by

this design worked incredibly well, as activity in most of the facilities gradually declined to near zero, allowing the fed to simply turn them off with no market disruption. the success of these facilities should be judged by the outcomes they produced for financial market functioning, and not by the financial returns they generated on the federal reserve ’ s books. however, there are several reasons why the fed might be expected to profit from this type of lending under most circumstances. first, the fed is providing funds in response to an extreme move in the price of liquidity – that is, it is in effect buying a cheap asset. second, the programs themselves, if successful at returning market functioning, would help the performance of the fed ’ s loans to be sound. and third, the lending under these facilities has to be adequately secured. asset holdings : a policy lever while the exit from the liquidity facilities has been successful, the exit from the accommodative stance of monetary policy involves a different set of challenges. many of these challenges arise from the federal reserve ’ s outright holdings of treasury debt, agency debt and agency mortgage - backed securities ( mbs ), which together represent the overwhelming share of the fed ’ s balance sheet today. indeed, as a result of our large - scale asset purchase programs, these asset holdings now account for $ 2. 0 trillion of the fed ’ s $ 2. 3 trillion balance sheet. the federal reserve is approaching the scheduled end of its large - scale asset purchases. we have bought $ 169 billion of agency debt to date, nearly fulfilling our plan to purchase “ about $ 175 billion ”. for mbs, we have only about $ 30 billion of purchases remaining to reach our $ 1. 25 trillion target. in addition, we completed $ 300 billion of purchases of treasury securities late last year. looking across these programs, we have now purchased $ 1. 69 trillion of assets, bringing us 98 percent of the way through our scheduled purchases. to get to this point, the trading desk at the new york fed has so far conducted 126 discrete operations to purchase treasury and agency debt, and has managed 292 trading days on which either it or its investment managers have acquired mbs. my view is that the purchase programs have helped to hold down longer - term interest rates, thereby supporting economic activity. with the conclusion of the programs approaching, the desk has been tapering the pace of its purchases of agency debt and mbs. however, even as the pace of our purchases has