Chat with Stefan Ingves 13 February 2013

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Isn't it upsetting to be called into question all the time when you publish your forecasts and decisions, social media are busy analysing your decisions now, experts on personal finances are responding to questions and everyone has all the answers, but you are the one with overall insight into what is best for Sweden

Lena Hansson (13:33)

Reply: Events in the economy affect such a lot of people, which means it is natural to have a lively discussion of where the economy is headed and how monetary policy should be conducted, so all of the opinions are a necessary part of the process and not something that upsets us at the Riksbank.

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Hello Stefan Ingves! The repo rate is at a historically low level, at the same time as Swedish household debt is at an all-time high! Are there any countries that have not had problems in their housing market in a similar situation? And what happens if there is a sharp fall in house prices in Sweden?

Patric (13:36)

Reply: Norway is one such country, but there are not very many, and the experiences of a high level of debt are that problems arise sooner or later. Many countries have had problems with lower debt levels than those in Sweden. In general, a fall in house prices leads to consumption falling as one starts to pay off one's loans and individual households may also suffer various types of financial problem.

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The Riksbank fails to attain its inflation target. Is it reasonable to have as many as 40 000 more people unemployed by keeping interest rates up by referring to borrowing being too high? Wouldn't it be better to keep to your main tasks and let the Government and Parliament and their authorities take care of the other problem?

Magnus Olofsson (13:39)

Reply: Do bear in mind the fact that we have halved the repo rate over the past year and that the current interest rates are at historically low levels and will remain at these levels for some time to come. We have done this to support economic developments, which also has a positive effect on the labour market. We cannot entirely disregard a high level of debt, because it can lead to substantial problems further ahead, this is clear from the experiences of many countries that have struggled with various financial problems.

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Hello Stefan Ingves! Is a normal level for the repo rate still 4.00%? The Riksbank has not had a normal level since autumn 2008, do you think that today's mortgage customers understand that the current interest rates are abnormally low and do you believe they can cope with a normal level of interest rates plus the bank's lending rate?

Magnus (13:41)

Reply: Yes, a level around four per cent is still what we consider to be normal, even though it will take quite a few years before we get there again. It is important to bear this in mind when taking on loans and to consider what risks one can take and what interest rate one can afford to pay.

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We have deflation in Sweden of -0.1% according to Statistics Sweden. Shouldn't this justify relatively large interest rate hikes to maintain the inflation target from 1992? We are now in a situation where, for instance, a falling oil price could have very negative effects on the Swedish economy, with consumption coming to a complete stop.

Karl (13:45)

Reply: CPI is very low at present, partly because mortgage rates have been cut as a result of our repo-rate cuts last year, and mortgage rates are part of the CPI. When mortgage rates rise, the opposite happens and CPI rises correspondingly. When large interest rate changes occur, we also look at other measures, such as the CPIF, which is not directly affected by our repo-rate adjustments.

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According to your website "The tasks and role of the Riksbank" the policy rate is changed to influence inflation in Sweden. If interest rates rise, people in Sweden have less money to spend, which reduces demand. Isn't it the case that petrol prices have at least as much influence on inflation for people in sparsely-populated areas? The lack of jobs must also affect inflation. Higher petrol prices and lower commuting distances mean that people have less money left over for other things. The conclusion must be that the policy rate only affects house prices within central Stockholm and that it has very little effect on how much money a family in another part of Sweden has to spend. Right?

Gunnar (13:48)

Reply: The repo rate affects demand in the entire economy, then the situation may be slightly different in different parts of Sweden, but it is the overall effect on demand that is the governing factor. This effect comes through several different channels and does not in any way merely affect an individual city or region.

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Inflation below zero. Rising unemployment. A strong krona. And yet you don't cut the repo rate. The main objective is inflation. Please explain so Swedish citizens can understand you.

Magnus Olofsson (13:52)

Reply: We have halved the repo rate over the past year and these measures have not yet had a full impact, moreover, the repo rate will remain at this historically-low level for some time to come. We are doing this to support economic developments. At the same time, economic activity will gradually improve abroad and this should also be taken into account. We also see some positive signs at present.

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Are you worried about what a strong krona means for growth in Sweden, and do you intend to take any measures if it strengthens further?

coobr (13:53)

Reply: Our assessment is that the krona is now at a reasonable level and it will remain at roughly this level over the coming years. Then it is possible that the krona will fluctuate somewhat in relation to individual currencies.

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Inflation has been below your target for quite a long time. What makes you think it will rise in the coming period?

olle (13:55)

Reply: The low repo rate contributes to the economy accelerating and when economic activity improves, prices will begin to rise more and we will approach our inflation target of two per cent.

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Hi! This question may be somewhat off topic, but I am interested to know why the Riksbank is selling off parts of its gold reserve and whether this is in some way related to today's repo-rate decision?

Rickard Boström (13:57)

Reply: We have sold quite a lot of gold in recent years, but right now we consider we have just the right amount. Our holdings in gold have no relation whatsoever to today's decision on the repo rate.

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Hi Stefan! Can you describe your normal working day for us?

Fredrik Westin (14:00)

Reply: I often have a lot of things to read and to discuss with other people at work. Then I have lots of trips, sometimes long ones, to various parts of the world as I am also chairman of the Basel Committee for Banking Supervision. This morning I managed to fit in a workout in the Riksbank gym, that was a bonus!