Chat with Stefan Ingves 29 april 2015

A big thank you for all your interesting questions, now I need to get back to other work tasks. I wish you all a pleasant May holiday.

Regards, Stefan Ingves

• Expectations of a repo rate cut were high! In a survey, more than 70% believed there would be an increase. If the market adapts to expectations, you don't see any danger in going against the flow?
alag (13:32)

Reply: The repo rate has been cut to a uniquely low level. At the same time, we are continuing to buy even more government bonds. This pushes interest rates down further. In this way, monetary policy will be even more expansionary, despite our choosing not to adjust the repo rate on this occasion.

• Hi Stefan, what is the largest risk connected with a low CPI?
Johan (13:34)

Reply: If prices fall (negative inflation) it is profitable to postpone making purchases. Then economic activity will come to a halt, unemployment will rise and many people may experience financial problems. This is not good for anyone. Stable game rules are good and we therefore need to bring inflation up to our target of two per cent again.

• Hi, what consequences will a minus interest rate have for companies on the market with regard to interest rates?
Kristina B. (13:36)

Reply: Deposit rates will be zero or very low. At the same time, it is very cheap to borrow. This makes it easy to invest. Demand rises and inflation rises. This is good for everyone.

• Hi Stefan, this year and next year the Riksbank will be issuing new banknotes and coins, but does cash have any future in Sweden?
Patric (13:38)

Reply: Banknotes and coins will be used in the foreseeable future, they won't disappear. On the other hand, fewer banknotes and coins will be used and more payments will be made electronically or in some other way. This is not a problem in itself. The important thing is that we can make payments efficiently.

• Hi Stefan, are there any other central banks in the world that have a policy rate as low as the Riksbank's?
Magnus (13:40)

Reply: Yes, both Denmark and Switzerland have lower policy rates than we have, but with some technical differences, so it is difficult to compare directly.

• Hi Stefan, how likely is it that the Riksbank will cut the repo rate further?
Anders (13:42)

Reply: We can cut the repo rate further if we need to, so -0.25 per cent is not a floor for the repo rate in any technical sense. What determines the level is the general economic situation and in particular what happens with inflation. The forecast is that we will remain at the current negative level up to the latter half of 2016.

• Hi Stefan, Is a normal level for the repo rate still considered to be 3.50-4.50%? Or have you changed it?
David (13:43)

Reply: We believe that the normal level still applies, but it will take many years before we return to that level again.

• Hi Stefan, the Riksbank thinks that households are borrowing too much, but sometimes it seems as though you think households save too much, I can't quite understand what you mean?
Fredrik (13:45)

Reply: Yes, household debt has risen over a long period of time. Some people are also saving a lot at the same time as debts are quite unevenly distributed. We think it would be good if households borrowed less to buy housing than they are doing at the moment.

• Hi Stefan, Do you believe the banks will introduce minus interest rates on their bank accounts and will the Riksbank manage it if bank customers want to take out cash?
Magdalena (13:47)

Reply: This is up to the banks to decide. So far, the banks have not applied minus interest rates to normal deposits. In reply to your second question – yes we have sufficient cash in stock to manage.

• Was there any disagreement on the decision?
J-Å (13:48)

Reply: No, we were completely unanimous.

• Hi Stefan, Is it more difficult to conduct monetary policy now than during the "Financial crisis" and the "1990s crisis"?
Olof (13:50)

Reply: Hmm, it is difficult to compare. We do not have a crisis in Sweden now, so in that respect it is somewhat easier, but at the same time rather different as we have a negative repo rate and are buying government bonds, so we are quite a long way off a "normal" situation.

• Hi Stefan, How large are the Riksbank's gold and foreign currency reserves, and when might they be put to use?
Lars (13:53)

Reply: At the start of the year, the gold and foreign currency was worth, in SEK, 455 billion. The value of the gold was SEK 37.5 billion. We can use the foreign currency reserve if we intervene in the foreign exchange market and we can lend money to Swedish banks if they are unable to obtain funding in other ways.

• Hi Stefan, Today Statistics Sweden published figures showing that households' bank loans amount to SEK 3,111 billion and that the growth rate is continuing to increase to more than 6%, has the Riksbank given up the fight against the debt mountain? It is easy and almost free to borrow money?
Kent (13:54)

Reply: No, not at all. We are continuing to point out that this is a problem, which right now should be managed by others as we have to focus on inflation.

• Not many people wait to buy milk or even a jumper because it might be cheaper in a year's time. Ordinary consumers don't make an investment when they go into a shop; they buy what they need, so why do you see deflation as a problem? The electronics branch is also proof that deflation does not have a negative effect on the inclination to buy. There has always been deflation in the entire electronics industry, but things are still going well for them.
Erik K (13:57)

Reply: Good question! One can always find individual goods that move up or down, but if prices on average are falling, then it will be profitable for many to postpone some of their consumption and then this will become a problem for the economy as a whole. This is why it is important to avoid deflation.

• The CPI is a faulty measure of inflation. Rent, Food, Clothes, Transport. Have become more expensive. The Swedish krona in relation to other currencies has fallen heavily. Housing prices have escalated.
Niclas (14:01)

Reply: We have chosen the CPI because it is the broadest and most well-known measure of price developments in Sweden. The CPI describes an average basket of goods and is therefore representative of developments in prices. Both the CPI and every other measure of inflation always have some technical properties that one can discuss and have different opinions on. We look at several different complementary measures of inflation when we discuss monetary policy in Sweden.