Chat with Stefan Ingves 17 December 2013

Many thanks for your many, many interesting questions. Sadly, I don't have enough time to answer them all. Merry Christmas and a Happy New Year to you all.

• Hi Ingves. Will mortgages be affected by this decrease? If not, what arguments could the banks have for not lowering their mortgage rates?  

Magdalena Andersson (13:31)

Answer: The most probable outcome is that mortgage rates will be decreased somewhat. By how much is hard to say. It may also vary from bank to bank, of course. Mortgage rates are fairly closely linked to the repo rate.

• You say that Swedish households must save and stop borrowing. So why are you lowering the interest rate? This doesn't reward saving, it rewards borrowing. What's your reasoning here?  

johan matsson (13:33)

Answer: Under certain circumstances, the interest rate needs to be low to restrain demand and keep inflation up - but at the same time, you have to be aware that interest rates will not stay low indefinitely, so it is also important not to borrow too much.

• Hi Stefan Ingves! Now you're lowering the repo rate even more, at the same time as household indebtedness is disturbingly high! Don't you think that indebtedness will increase even more now? And when will it be too high?  

Patric (13:35)

Answer: Yes, indebtedness will now increase somewhat, so that risk remains, but, at the same time, it was important to focus on inflation this time, as it had been lower than expected.

• There has been intense pressure from the media to lower the repo rate. Does this interest rate cut mark the end of the independent Riksbank?  

Anders (13:37)

Answer: Not, not at all. There has always been a great deal of discussion of monetary policy, and this is exactly how it should be. It's part of the job and we're used to dealing with it.

• At the Riksbank, you've long said that a normal repo rate should be about 4.00%. Now you're lowering it to only 0.75%. Is it time to change your view of a normal level? If so, how low should it be?  

Fredrik (13:39)

Answer: We usually talk about a normal interest rate as being in the span of 3.5–4.5, and we still expect to be on the way to that level when economic activity recovers. But it's an important question well worth mulling over.

• Alarm bells have long been ringing over households' large debts. Isn't this interest rate cut merely throwing fuel on the fire?  

David (13:41)

Answer: Naturally, meeting the inflation target at the same time as we deal with financial risks is a difficult balancing act. Inflation has now become lower than we expected, making that issue more important. Other authorities will also have to address the debt issue so that we can get a good balance in economic policy.

• When do you expect the US dollar to lose its status as the world's reserve currency?  

Rikard (13:42)

Answer: Not in the foreseeable future.

• My forecast is that you'll have to lower the interest rate again in 6 months, largely due to the slowdown of Sweden's service sector. What do you think?  

Erik (13:43)

Answer: Not as far as we can see. The future is always uncertain, but our assessment is that an unchanged interest rate is most likely.

•  How did you vote in the latest decision for an interest rate cut? And who entered reservations?  

Johan Krock (13:44)

Answer: We were unanimous. No reservations were entered. When the decision is that obvious, you don't actually need to vote!

Tommy (13:47)

Answer: There are lots of books on the subject of macroeconomics that deal with these issues. If you'd like to read something different and interesting on the subject, I can recommend Gårdlund's book on Knut Wicksell and his life as an economist about a hundred years ago.

• Hi Stefan ( ͡° ͜ʖ ͡°) Why have you lowered the interest rate? What do you actually wish to achieve? //Racemouse

Racemouse (13:49)

Answer: Inflation was lower than we expected, so we need to get inflation up as economic activity improves, and an interest rate cut will help with this. This will let us meet our inflation target of two per cent.

• It's sensible of the Riksbank to now realise it has to follow the inflation target of two per cent. This is its main task. Let somebody else take care of any housing bubbles. Or would you prefer the Riksdag to lower the inflation target, Stefan?

Magnus Olofsson (13:53)

Answer: It's not quite that simple. If there are problems on the mortgage market, this will make it likely that we'll not only miss our inflation target, but also encounter problems with economic developments in general as well as financial stability. So there are no easy answers in this issue. Naturally, we always keep the inflation target in focus, but economic developments are seldom the result of just one factor.

• How secure are the forecasts of an improved global economy in 2014? Which factors could jeopardise this improvement?

Bertil Svensson (13:55)

Answer: It's our best assessment at the moment. If developments in the United States are better than expected, the economic upturn will probably be even more rapid. On the other hand, if loads of problems return to the EMU – well, then it'll be slower than we'd expected.

• Hi Stefan! What's the best thing about your job?

Jasper (13:58)

Answer: For a long time, I've been interested in economics and how financial systems work. Now I get to spend all my time on this, at the same time as I meet a great many interesting people who are also deeply absorbed in these matters.

• Good work Stefan and Co. and Merry Christmas!

Daniel (13:58)

Answer: Thank you and a Merry Christmas to you too!