Chat with Stefan Ingves 20 December 2011

Picture of Governor Stefan Ingves. Photo Petter Karlberg.Governor Stefan Ingves chatted in Swedish on the Riksbank's website. This is a translation into English of the questions and replies.






Hi Stefan, I just want to wish you a Merry Christmas and a Happy New Year. Think you do a great job. Daisy

Reply: Thank you for your kind words! Thanks also to everyone for many good, interesting and exciting questions in the chat. Now the chatting is over for this year. We will meet again in February. Merry Christmas and a Happy New Year!




Shouldn't you be able to put a bit more pressure on the banks to follow the repo rate. During the autumn they have already raised interest rates despite an unchanged repo rate. Now the repo rate has been cut and they are keeping their mortgage rates at the same level. This should surely be regarded as an increase? The banks should be able to borrow money from the Riksbank at an interest rate in relation to the repo rate? So isn't it stupid to turn to someone who demands a higher interest rate?? Fredrik

Reply: The banks normally do not fund their own lending through the Riksbank, but on the market. They only borrow from the Riksbank if they have major problems, which is not the case at present. There is therefore no immediate and direct connection between the repo rate and individual mortgages.




Hi, what exactly says that GDP and inflation will rise at the end of 2013? Isn't this just guesswork by the Riksbank! Bengt

Reply: Our assessment is that at this point there will have been a recovery in Europe, as the public finance problems are gradually resolved. This will also affect demand in Sweden with a gradual rise in prices. The low interest rate we have now will contribute to this as monetary policy is expansionary in this period.




The banks are trying to compensate their losses on higher reserve requirements by squeezing even more money out of us ordinary folks. Have you thought about that at the Riksbank? Rune Svensson

Reply: The Riksbank has no formal reserve requirement, but the banks do need to hold more cash than before and this ultimately benefits everyone, as it increases financial stability.




Hi! I feel that the Riksbank has no influence to stimulate us consumers to feel secure because the banks don't follow the Riksbank's interest rate cut. It feels as though the cut has no significance, is this true? Best wishes, SeyedSeyed

Reply: It takes time before monetary policy has a full impact on various interest rates. If we look back over the past four or five years there has periodically been great uncertainty as a result of problems in the financial markets, but monetary policy has nevertheless had a powerful impact and influenced the general interest rate level and this will probably remain the case.




Hi! Does this mean that the Riksbank has abandoned the inflation target? Johan

Reply: No, the inflation target is and will remain 2 per cent. In an uncertain world it is not always possible to be on target all of the time, but we do our best and always aim to attain an inflation rate of around 2 per cent when formulating our monetary policy.




Can a private individual borrow money from the Riksbank? Jeppe

Reply: No, not anymore. It's a long time since the Riksbank also functioned as an ordinary bank.




Can't you as the central bank more directly affect the interest rate banks charge their end customers? Diego Lopez

Reply: It is the banks themselves who set the interest rates their end customers pay. These interest rates are in turn steered by what it costs to borrow on the market, both in Sweden and abroad. For this reason we cannot expect a direct link between the repo rate and the various mortgage rates.




Can the interest rate really affect inflation? Aren't all the events during 2011 (large and small) proof that the interest rate is dead as a method of control? Sweden is a small country and the only thing that matters is to keep public finances in order. Gunnar

Reply: Yes, the interest rate affects inflation, but the control is not very precise and can vary substantially over time. It takes up to two years before a repo rate change has achieved its full impact and during this time a lot of other events may occur. This is why it is not easy to govern with precision.




Hi, I am completing my two-year master's degree in economics. Swedish tax-payers paid an extremely high price for the incompetent economic policy conducted in the 1970s and 1980s. Can you see any reason at all why Sweden should take one single krona in loans to prevent European banks suffering losses from their government securities? We paid for our politicians' mistakes, they can pay for theirs. Best wishes, Ola

Reply: Sweden has a long history of helping other countries to manage their economic problems. In the current case it is also so that we will ourselves benefit from the problems being solved as we have a lot of exports to the rest of Europe. With a joint effort we can resolve the problems faster than if everyone works in their own little corner.




Why didn't the Riksbank cut the repo rate by 0.50% like they did recently in Norway? What is there to say that Sweden has better conditions for having a relatively high interest rate? Ulla

Reply: We adapt the interest rate level to Swedish conditions and it was therefore appropriate to cut the rate by 0.25% on this occasion. In Norway they do things the same way, but of course based on economic developments in Norway.




The Riksbank had a brighter forecast than the Swedish employment agency with regard to unemployment, even before the adjustment of the repo-rate path. Why is your assessment different? Håkan Karlsson

Reply: We make an assessment of unemployment related to general developments in the economy (GDP). This analysis forms the basis for our forecast. I cannot comment on what forecasting techniques the employment agency uses.

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