Chat with Stefan Ingves 21 April 2016

Hi and thanks for all the interesting questions. Unfortunately, I can't answer them all. Have a great day! Regards, Stefan Ingves.

What responsibility do you at the Riksbank have in relation to Finansinspektionen, the Swedish National Debt Office and politicians?
Wilmer Nordblad Lundin (13:32)

Answer: The law says that our job is to maintain price stability and ensure that the payment system is efficient. In practice, this means a monetary policy with an inflation target of 2 per cent and a constant focus on financial stability. This latter overlaps to a certain extent with the tasks of the Swedish National Debt Office and Finansinspektionen.

Mr. Ingves, what would you say? Does SEK's current exchange rate actually reflect its real value according to fundamental factors, or is the Swedish krona presently undervalued/overvalued? Thank you in advance!
Mike (13:33)

Answer: A precise number is hard to establish. Presently the key is to ensure that the krona only appreciates slowly.

Have you employed different measures for different financial crises in recent years, e.g. between the crisis of 2008 and the crisis of the 1990s? Jakobb (13:35)

Answer: Crises are not always the same. To a large extent, the crisis of the 1990s was about solvency, banks making losses, while the crisis of 2008 was about liquidity, as the international capital market had ceased to function. No two crises are alike, but ways of solving problems remain fairly constant over time.

Hi Stefan. The Riksbank has now had a negative repo rate for over 1 year and your forecast is that this will continue for a bit more than 1 more year. Which side-effect of the negative interest rate will you be most worried about when you take stock in a few years' time? Patric (13:37)

Answer: Borrowing is cheap, so there's a risk that people will borrow too much or make high-risk investments that then fail to work.

Why are you permanently wrecking the Swedish economy by stimulating the rate of debt increase to bring the CPI up to 2% in one single year? If inflation rises and you raise the repo rate again, the economy will, of course, completely crash under this level of debt! How can the CPI be more important than financial stability?Karl Hallström (13:40)

Answer: There are no simple answers to your question. Interest rates are also very low among our neighbours and, if we were to raise the repo rate substantially, the krona would rise in value and inflation would stop rising, unemployment would increase and we would experience a poorer economic outcome. An alternative policy would then be to tighten things up in another way, e.g. with the help of amortisations or a debt ceiling, but doing several things at the same time is always complicated.

Your current stimulation is leading to increased borrowing in a time when everybody is already highly indebted. You'll never be able to raise the repo rate again. Surely the economy can't cope with this? Åke Johansson (13:42)

Answer: If inflation is high, we'll raise the repo rate and it will then be important that everybody is able to cope as we won't take consideration of individual borrowers. This is exactly why we've been nagging and nagging, for years, about amortisation requirements and other measures making it more difficult for households to borrow. This will make it possible to cope with periodic bad times.

Hi Stefan. The Riksbank's forecast shows that you'll reach the inflation target next year but will still have a negative repo rate. Won't it be time to raise the repo rate then? Annika (13:43)

Answer: Yes, you're right. In our forecast, we expect to be able to start raising the repo rate next year.

How do you expect that purchases of government bonds and repo rate cuts will push up the price of pork fillets (CPI)? Logically speaking, surely this can't work? Aren't you instead pushing up prices for other things that are NOT included in the CPI (housing and shares)? Nils Jönsson (13:44)

 
Answer: When demand rises, all prices rise. Maybe not always by as much, but the price of pork fillets will probably also rise too.

Hi Stefan. From a technical standpoint, is it possible to have two repo rates, where households have their own, higher repo rate? Patric (13:46)

Answer: Technically, it wouldn't be easy to achieve this. What you suggest could be achieved indirectly, e.g. by abolishing tax deductions on loans to households.

Can a central bank go bankrupt? Kurt (13:47)

Answer: No! We can always create more money, so we can always pay our bills in Swedish kronor.

Hi Stefan. Economists and politicians say that things are going well for Sweden just now, but nevertheless we have a negative repo rate. How can this be? Anders (13:49)

 
Answer: Monetary policy, the negative repo rate, is one reason for why things are now going well for Sweden. At the same time, inflation has been low for a long time and interest rates are equally low abroad. This means that it's also reasonable to have a very low repo rate to bring up inflation here, at home.

Hi. Has it ever happened, during your years of service, that a government minister has interfered in your decision on the repo rate level, even though it's forbidden? Anna (13:49)

Answer: No, it's never happened.

Hi Stefan. Is inflation rising above your forecast just now? Lars (13:50)

Answer: We've just made a new forecast, so we'll have to see. Naturally, we believe in our own forecast.

Hi. Is the CPI the best way of measuring inflation or are there any other measures? Fredrik (13:54)

Answer: We could discuss this until the cows come home as opinions are divided. The CPIF, i.e. the CPI with a fixed interest rate, is another alternative. So too is the HICP, a measure used in many countries, which makes comparisons easier. And then, we sometimes illustrate different economic phenomena using different measures that are a subset of the CPI, more or less depending on what we want to show.

Hi. How big are the gold and cash reserves just now and are you considering increasing them in the near future? Jan (13:57)

Answer: On 31 December 2015, the market value of the gold and foreign currency reserve was SEK 457 billion. We make a decision on how large the foreign currency reserve has to be at regular intervals. One example of a matter that might possibly change our conclusion is Nordea's transformation into a branch structure, which could lead to us needing to increase the foreign currency reserve.

How long will the interest rate will be low or negative? Or is it hard to predict? mohsin (14:00)

Answer: Policy moves are always hard to predict. Our projection earlier today, the policy rate path, tells us that the first move up will happen in the latter half of 2017, but this is a projection not a promise. If the world changes, we will change as well.