The Riksbank has now cut its interest rate to -0.50%. At the same time, the banks are contacting their customers and urging those of them who have interest rates based on a market rate, e.g. STIBOR 90 with a certain margin, to accept that STIBOR can never be expected to be negative, i.e. the banks must always at least get their margin. So it doesn't matter how much the Riksbank cuts the repo rate. How does the Riksbank view this? Anders Angelstig (13:33)
Answer: There's no direct one-to-one link between the repo rate and individual loan contracts. However, it is the case that many different interest rates follow when we cut the repo rate. They match quite well and, in that sense, monetary policy is having the effect we want. In addition, the repo rate also has an effect on the exchange rate, which is also what we want.
Hi. How will this cut affect the euro exchange rate in the short term? The euro shot up in conjunction with the decision! What's the forecast for the euro two weeks ahead? / Worried (13:34)
Answer: We don't make short-term forecasts of the exchange rate and neither do we make forecasts of individual currencies.
Hi Stefan. Now you're cutting the repo rate to the historically low level of -0.50% and you write that the possibility exists of even more cuts. Purely technically, how low can you cut the repo rate without damaging the economic system? Patric (13:35)
Answer: It would be possible to cut the repo rate further, if necessary. Ultimately, it's not a technical question but depends on the general development of the economy and, not least, on the rate of inflation.
Is there anything you can do in the role of Governor of the Riksbank to make our politicians bold enough take more powerful action against the high level of indebtedness? Or can you only wait and hope they act on your (and others') warnings? Michelle (13:38)
Answer: I've been warning about this for a long time and measures have been presented too slowly, but now increasing numbers of people are accepting that high debts are a problem and the political process for adopting further measures has started. My hope is that these discussions also lead to results.
Hi Stefan. Before this interest rate cut, the banks were complaining that the negative interest rates were costing them hundreds of millions. What's your opinion of the possibility that they may now try to recoup this cost from us, the bank customers, by applying negative interest rates to our savings accounts? Magnus (13:39)
Answer: The banks earn about SEK 100 billion in one year and the negative repo rate is costing the banks about SEK 1 billion. In other words, it's a cost that the banks can easily bear.
My husband and I save money every month so that we can buy our first home. We've been saving for several years now. During this time, the value of our friends' homes has risen several times more, even though we save several thousand kronor every month. The only answer seems to be to jump on the bandwagon too, even though this will involve huge debts. Do you at the Riksbank see it as a problem that borrowing is rewarded ahead of responsible saving?
Answer: This is exactly what happens when the housing market doesn't work. If it gets harder to borrow, prices won't rise as much, and the same thing will happen if the supply of housing increases. In both cases, future house buyers will benefit from the development as it will get easier to save for and purchase a home.
What's your assessment of the risk of another global financial crisis like the one we saw in 2007? Christine (13:42)
Answer: I don't think the risk is the same today. On the other hand, new types of problem can always arise in different parts of the world.
Hi Stefan. If the banks now introduce negative interest rates for savings accounts, how are we supposed to be able to withdraw our money, now that they've taken cash handling away? Can you force the banks to have cash handling? Annika (13:44)
Answer: We can't force the banks to keep cash, but it's always possible to withdraw money from an ATM, and if your bank doesn't have cash – you can always change bank!
Hi Stefan. Households have about SEK 3,300 billion in bank loans and about SEK 1,500 billion in their bank accounts. Do you think that households are borrowing too much or saving too much? Fredrik (13:46)
Answer: One of the difficulties here is that it's often not the same household that's both saving and borrowing, so individual households can still be borrowing too much, even though others are saving. However, all in all , households' debts have increased very heavily over the last twenty years and these debts have now reached such a level that they pose a risk both for individual households and for Sweden.
Hi Stefan. Does the Riksbank have enough of a cash reserve if the banks now decide to introduce negative interest rates on our savings accounts? And how can we take out our money now that cash handling has been taken away? Ingvar (13:47)
Answer: Yes, we've got plenty of cash in storage, particularly at present, when we're busy replacing all our old cash.
Hi Stefan. I'm interested in Sweden's macroeconomy on a hobby level. Do you have any suggestions for what I should read to gain a greater understanding? Patric (13:48)
Answer: Read our regular Monetary Policy Reports! Another popular book on this subject is Vår Ekonomi by Klas Eklund.
Are you aware of the risks of a negative interest rate? If it was anything good, the whole world would be doing it too. Rawand (13:50)
Answer: Yes, I'm well aware of the risks. Increasing numbers of central banks, most recently Japan, have negative interest rates today.
Hi Stefan. Is it true that the Riksbank is the world's oldest central bank and that you now have the world's lowest policy rate? Anna (13:51)
Answer: Yep, we're oldest (1668) and among the lowest just now. Policy rates are a little hard to compare because different central banks have different operational frameworks, which is why my answer isn't entirely precise.
Hi Stefan. What are the risks involved in lowering the inflation target? Anders (13:53)
Answer: It can bring you closer to deflation, i.e. falling prices. We think two per cent is pretty much right. Above all, it's important not to change the target too often. If you do, nobody knows what to believe in.
Hi. Considering that the Riksbank has now repeatedly cut the repo rate without it seeming to have a significant effect on inflation, I wonder if there's a limit for how low the repo rate can be cut. Tomas (13:55)
Answer: The repo rate can be cut further, if necessary. Our assessment is that monetary policy has had the effect we want, as prices are on the way up in Sweden and we expect inflation to be around two per cent in 2017.
Hi Stefan. At present, how many years do you think it'll take until we have a normal repo rate level of around 4%? Johan (13:56)
Answer: It'll be a long time before we reach that repo-rate level again and it won't happen during the forecast period we can see just now.
Hi Stefan. The Executive Board was divided over the repo-rate cut. Do you have an open working climate at your monetary policy meetings? Jan (13:58)
Answer: Yes, I absolutely think we do. It's not easy to look into the future and economic developments are seldom clear-cut. We spend several weeks discussing matters with each other until it's time to take a final position at the monetary policy meeting.
The Bank of Japan's board recently expressed concern about a global 'race to the bottom' as central banks cut rates. Are you concerned this might be happening now? Dan Hinge, Reporter, Central Banking (14:00)
Answer: I am convinced all central banks do their best to get inflation up to their respective targets. By working in the same direction global inflation will go up and that is good for everybody.
