no reasons to question confidence in the inflation target. it was firmly established and long - term inflation expectations were just over 2 per cent. however, what has happened since then is that the riksbank and other analysts have on several occasions been surprised by inflation being lower than expected and have therefore been forced to gradually revise down their inflation forecasts. as the period with an inflation rate undershooting the target has become longer, economic agents have adjusted their inflation expectations downwards. during 2013 and 2014, for instance, the five - year inflation expectations in prospera ’ s survey showed more or less a falling trend to just under 2 per cent. the further long - term expectations deviate from the target, and the larger the deviation, the greater is the risk that the inflation target will begin to lose its role as benchmark for pricesetting and wage formation. in this way, expectations can have an impact on actual inflation, which risks reducing expectations further, and so on, in a self - reinforcing negative process. it can be very difficult to get out of this situation. this is how the rapid cuts in the repo rate since the middle of 2014, and the purchases of government bonds that have recently been a complementary part of monetary policy, should be regarded. the riksbank is the authority that has the explicit responsibility for attaining the inflation target. although we must also act to ensure the financial system is stable and functions efficiently, through the wording in the sveriges riksbank act on “ promoting a safe and efficient payments system ”, the latter is a task that we share with the government, finansinspektionen and the swedish national debt office. and the first line of defence with regard to counteracting the emergence of financial imbalances is macroprudential policy, including the tools for which finansinspektionen has been given chief responsibility. finansinspektionen ’ s mandate and tools for macroprudential policy need clarification in law it is therefore very unfortunate that there appear to be doubts with regard to the legal possibility for finansinspektionen to use some of the tools – as in the case of the amortisation requirement. 2 the decision to give finansinspektionen the responsibility for macroprudential policy was preceded by a fairly intensive debate, where other possible solutions were also discussed. one can therefore assume that the decision finally reached actually reflects the

try to calculate measures of inflation that distinguish temporary price changes regarding individual products from more lasting price changes covering several goods and services. most central banks tend to use concepts such as core inflation or underlying inflation in this way. 3 the concept of underlying inflation began to be used more often during the 1970s underlying inflation, or core inflation, is a concept that has long been used in the monetary policy debate. however, it has received rather more sporadic treatment in academic literature. the concept is defined for the first time in an article by schreder ( 1952 ), analysing text in a number of articles from the jstor database ( see wynne, 2008 ). this was in connection with a discussion on the general increase in prices that was expected to happen in the united states : even those who tend to agree with the concept of a rough balance between supply and demand ( i. e. no inflationary or deflationary gap ), point out that there is still a huge money supply — and that is the hard core of inflation …. in time, this concept began to be used increasingly often, especially when inflation began to rise at a rapid pace in the beginning of the 1970s ( see figure 1 ). 4 according to gordon ( 1975a ), the higher rate of inflation was due to a number of factors : that food prices had begun to increase faster as a result of supply factors in the united states and abroad, that the oil price had risen as a result of production restrictions introduced by the opec oil cartel, that the nixon administration had introduced price and wage freezes and the devaluation of the dollar in 1971 and 1973. now a need arose to distinguish temporary price increases from more lasting ones. 3 see, for instance, rogers ( 1998 ) for a discussion of how central banks use the concept. the next reference in the same text search of wynne is sprinkler ( 1975 ). he writes : “ recent price increases of 10 - 12 percent annually were about double the hard - core inflation ”. 3 figure 1. cpi inflation in the usa annual percentage change. - 2 - 4 50 55 60 65 70 75 80 85 90 95 00 05 10 15 source : bureau of labor statistics in november 1974, when the rate of inflation according to the consumer price index amounted to more than 12 per cent in the united states, milton friedman wrote the following in newsweek : 5 that monetary expansion on the average could be expected to produce an inflation of something like 6 per cent