at the same time, it has been taken for granted that the policy should be flexible insofar as it, in addition to the inflation target, should also try to stabilise fluctuations in employment. 27 the current arrangement with an inflation target and other reasoning in the preparatory works feel about right for me. greater consensus on consideration for financial stability another issue is whether flexible inflation targeting should also include taking the degree of financial stability into consideration. 28 this issue has sometimes been perceived as very controversial, but i think i see greater consensus among experts. i think it is obvious that there are close links between monetary policy and financial stability. the degree of financial stability affects how monetary policy measures spread to inflation and employment ( the socalled transmission mechanism ). at the same time, price stability contributes to a “ safe and efficient payment mechanism ” and facilitates stability in the financial system in general. the question discussed is whether the central bank ’ s responsibility for financial stability also means that financial stability should be an objective for monetary policy. i interpret the literature as there being a great deal to indicate that financial stability should in principle be an objective not only for macroprudential policy but also for monetary policy, although it will be a practical and quantitative question to determine in each given situation how much financial stability should be considered in monetary policy decisions. 29 in principle, it would be best if monetary policy and macroprudential policy could be coordinated, but there are also relevant arguments against such coordination. 30 it is claimed that macroprudential policy and microprudential policy should be the “ first line of defence ” against financial stability risks and that monetary policy should focus on stabilising inflation and growth in the real economy. but given the strong links between financial stability, price stability and real economic stability, it cannot be ruled out that monetary policy sometimes needs to be used to mitigate financial stability risks. how much depends, among other in the preparatory works for the sveriges riksbank act, it was stated that the riksbank, without prejudice to the price stability target, should support the goals of general economic policy with a view to maintaining a sustainable level of growth and high rate of employment. for example, goodfriend and king ( 2016 ), p. 98, write as follows : “ we do not think it sensible to extend the objective of the central bank to include numerical targets for employment and output. the experience of forward guidance in both united states and united kingdom suggest that

government securities. the increased balance sheet totals of central banks poses risks for future economic losses, which may have consequences for monetary policy, or for the autonomy of central banks. theoretically, a central bank ’ s losses can be so large that it is either forced to create more money, with the potential risks to price stability this entails, or request funding from the public treasury, something which could affect the degree of autonomy. in addition, the reduction in see leeper ( 2011 ). see mehrling ( 2014 ). see archer and moser - boehm ( 2013 ). bis central bankers ’ speeches the use of cash means that central bank revenue from the issuing of banknotes and coins – known as “ seigniorage ” – decreases, which further inflates the risks of central bank finances becoming more strained than previously in the period ahead. less room for manoeuvre in the wake of financial globalisation central banks ’ room for manoeuvre is affected not only by how independent they are in accordance with national regulatory frameworks. i have today spoken about how central bank operations, in basically all areas, are influenced by financial globalisation. over the past 30 years, international capital flows have increased dramatically. 34 this reflects the gradual liberalisation of capital flows that has occurred over a long period. in the right circumstances, especially when countries have achieved a certain level of institutional and financial development, and when there are regulations and oversight, free capital flows lead to considerable efficiency gains. but it does not mean that the completely free movement of capital is good for all countries at all times. the fact that many countries have been affected by the us credit cycle is nothing new, but the fact that this synchronisation now includes developing countries as well as a large number of other countries is a more modern phenomenon. this increased global financial covariation does not just apply to credit in relation to gdp but also within basically all financial asset types. 35 the financial conditions in the large and dominant currency areas, such as the dollar and the euro, are spread to the rest of the world via the free movement of capital irrespective of floating exchange rates. floating exchange rates cannot therefore isolate an economy from the global financial cycle. this can, of course, lead to problems for some countries during certain periods. it can, for example, lead to inflated or rapidly falling financial asset prices, posing considerable risks to the financial system and macroeconomic growth. interest rates are currently determined