Riksbank should have new inflation target

Professor Marvin Goodfriend from Carnegie Mellon University and Mervyn King, former government of the Bank of England, who reviewed the Riksbank’s performance 2010-2014, have suggested the Swedish central bank ought to be able to take longer than two years to reach the inflation target of 2 percent, as long as they give sufficient reason.

Mervyn King says that confidence is built on honesty, “There is no point pretending that the world has not changed. The Riksbank ought to be able to say ‘Right now we cannot achieve the target within two years without destabilising the economy’”.

They criticised the bank for overly optimistic forecasts, as well as for a mechanical trust that monetary policy and fine-tuning of interest rates would achieve inflation targets.