Chat with Stefan Ingves 5 september 2013

• Hi Stefan Ingves! You're now holding the repo rate at a low level of 1.00%, at the same time as the rate of growth of household debt is increasing. Can the Riksbank wait until the end of 2014 before raising the repo rate? Aren't you going to have to raise it sooner?  

Magnus (13:35) 

Answer: Our assessment is that the repo rate will not have to be raised until the end of 2014. We will need to continue to have a low repo rate during this period to support economic development, and then inflation will also rise to our goal of 2 per cent.

• Five years ago, the Riksbank had a repo rate of 4.75%. Do you believe we will again have a repo rate at this level within the next five years?  

Fredrik (13:37) 

Answer: It's hard to say. At any rate, if it does happen, it will be a good while before the repo rate reaches this level. It depends on how the economy develops over the next five years. Our present assessment is that the repo rate will be at 2.8 per cent at the end of 2016.

• Hi Ingves. I expected that the repo rate would remain unchanged, but my question concerns how we're moving towards an increasingly cashless society. The banks are providing smart solutions to help this along, such as Swish, for example. Many bank branches don't even handle cash any more. Despite this, the Riksbank has chosen to change all our banknotes, which doesn't feel like a priority for the future. Could you explain, please?  

Magdalena Andersson (13:39) 

Answer: While it's true that the use of banknotes and coins is steadily diminishing, banknotes and coins will continue to be used for the foreseeable future. The banknotes and coins we have today are old-fashioned and also need to be technically adjusted to today's demands. Among other things, the new coins are much lighter, which is good from an environmental point of view.

• How come today's decision once again refers to household debt when it has finally been decided that this is Finansinspektionen's remit and nothing you need to consider in your decisions?  

Patrik S (13:43) 

Answer: It's good that we've now cleared up how decisions are to be made in this context. At the same time, the situation is that we examine how a number of different issues affect the economy and how they influence monetary policy. This will also be the situation for measures in the area of macroprudential policy, regardless of who formally takes decisions.

• Now that the Government and Finansinspektionen are trying to take power from the Riksbank over financial stability and dampening household indebtedness, is the Riksbank still independent when it assesses the level of the repo rate? And what power does the Riksbank have left?  

Johan (13:45) 

Answer: The Riksbank is fully independent when we take decisions on the repo rate and will also continue to remain so.

• Hi Stefan! Does the repo-rate path, which continues to include a certain small probability for a lowering of the repo rate over the coming quarters, reflect the opinion of the majority of the Executive Board that it is more likely to be lowered (rather than raised) over this period or does it reflect the fact that two members want to lower the repo rate by 25 basis points?  

Curious (13:48) 

Answer: That's not really how it is. Both the members entering reservations each wanted their own, different repo-rate paths – so their views have not been taken into account in the majority decision. The majority's view is that the repo rate will remain at one per cent just now but, if it were to be raised or lowered, there is a slightly greater probability that it would be lowered in the period ahead.

• How can you sit there defending Sweden's currency when our basic industries (e.g. paper mills) are DYING? We'll never get that industry back again!  

stefan (13:51) 

Answer: The exchange rate isn't determined by how well things are going for an individual branch of industry. For a long time, we've had a variable exchange rate in Sweden, meaning that the market determines the price of the Swedish krona. Our assessment is that the krona will remain at about this level for some time to come.

• Hi Stefan! You say that inflation will increase, but isn't there a risk that you're overestimating it again like you've done in recent years? As you know, the National Institute of Economic Research has criticised you, saying that this led to excessively high interest rates.  

Susanne (13:55) 

Answer: It's always difficult to make forecasts. One per cent is a low repo rate. Our assessment is that the low repo rate will contribute towards inflation increasing towards two per cent when economic activity strengthens. We carried out a review of our inflation forecasts in the spring and then adjusted our forecast downwards. The difference between us and other forecasters is not particularly wide at present.

• Hi Stefan Ingves. You seem to have a positive view of the labour market, but isn't there a risk that unemployment will remain on a high level? Wouldn't it help if you lowered the repo rate more? Many people say so.  

Torbjörn (13:57) 

Answer: Our assessment is that the situation on the labour market will improve at the same rate as the economic upturn. We were positively surprised by the latest figures, when unemployment turned out to be lower than we'd thought. Next year, we expect to see a clear improvement on the labour market.

• Has the Riksbank abandoned the inflation target? There hardly is any inflation any more.  

Magnus Olofsson (14:01)

Answer: The inflation target continues very much to apply. In an uncertain world, you have to expect that the rate of inflation won't always be exactly on target. We don't have that kind of manoeuvrability, but we do what we can to bring inflation back to two per cent when it deviates. This is also why we have a low policy rate just now.

• Is it true that the money I borrow from the bank isn't somebody else's deposits, but is created by the bank at the moment I borrow it, by the bank quite simply entering the money into my account?  

Henrik J (14:06)

Answer: An individual bank always has to first get the money into an account before it can lend it out. When this money is then lent, it turns up again as a deposit in the bank or elsewhere, so the money can be lent out again, and so on. This continues as long as there is demand for loans and a need to hold deposits in an account. In this respect, the banking system as a whole creates money by itself, just as you say. For this to work, everybody has to trust that the system will function. The Riksbank plays an important role in this, as we are the only one who can issue banknotes and coins or otherwise lend money to the banks. We are the guarantor who ultimately ensures that the system works.