Chat with Stefan Ingves 6 July 2016

Thank you for all of your interesting questions. Now I need to get on with other work. I hope you all have a lovely summer, and we will return in September when it is time for the next repo-rate decision. Wishing you a good summer, Stefan Ingves 

The Brexit-referendum outcome was worrying and weakened currencies such as sterling and our own krona. Can this have been positive for inflation, as a weaker currency is something the Riksbank aims for and with that higher import prices? Jonathan (13:32)

 
Reply: A weaker krona affects inflation a little, but on the other hand growth is slightly poorer and this holds bank inflation so the effects more or less offset one another.

The Riksbank is on this occasion the first to make an announcement in relation to other central banks. Are there any consequences of not being able to "do like the others"? How does this affect your decision and what will the consequences be? Jonathan (13:34)

 
Reply: It is not so important. Central banks do not follow one another in this way. We all do the best we can on the basis of our own country's economic conditions.

Your current monetary policy doesn't have any effect until a long time from now. When? How long does it take until it has an effect? What are your speculations regarding the international situation then? Jonathan (13:36)

 
Reply: We usually say that it take around two years before monetary policy has a full impact. This appears to be the case now, as the low interest rate has led to rising inflation. In two years' time, we believe that inflation will be around 2 per cent, measured in terms of the CPIF, and that growth in the Swedish economy will still be good.

Brexit feels rather passé for Sweden now and we have an amortisation requirement, which is good for Sweden. When will it be time to raise the policy rate? Noni (13:37)

 
Reply: According to our repo-rate path, slow increases in the repo rate will begin during the latter part of 2017.

Hi Stefan, the inflation target of 2% is set in terms of the CPI, do you have any other targets for the CPIF and HICP? Patric (13:41)

Reply: No, we have only one target, the CPI, in the long run. The disadvantage with the CPI is that this index includes our own interest rate adjustments, which makes the analysis more difficult. In the short run, the CPIF, the CPI with a fixed interest rate, gives a good idea of where we are heading. The HCIP is very close to the CPIF, but is a measure that we do not actually use, although it functions well in international comparisons as many other countries use the HICP.

I get the impression that many people think the Riksbank is "over stimulating" the economy, do you think you are adding too much fuel? Jonathan (13:43)

 
Reply: No, we are adding just the right amount of fuel so that we can bring inflation up to 2 per cent. When we get there we will begin raising the interest rate, that is, we will be adding less and less fuel!

Hi Stefan, the key to dampening household indebtedness appears to be that housing prices will not continue rising, can you do anything about this? Patric (13:46)

Reply: No, we cannot directly influence housing prices. It is possible to do so, however, if one raises property tax, abolishes the tax deductions for interest payments or increases the supply of housing, for instance. Lowering the mortgage cap or raising the amortization requirements can work in roughly the same way.

How low can the repo rate go? Daniel Lundberg (13:49)

 
Reply: In purely technical terms, there is no obstacle to cutting the repo rate further. Whether this is actually needed is a different matter. If the rate is cut by a large amount, you would have to pay to deposit money with the banks. Then people may prefer to hold cash instead, so a very low "minus rate" could mean the system stops working, but we have not come to that stage.

Hi Stefan, what is your reasoning with regard to Brexit and how it will affect growth in Sweden? Gunnar (13:51)

Reply: Growth, which is currently very good, will be slightly lower as a result of increased uncertainty, which affects exports, consumption and investment. These effects mainly apply to the United Kingdom and to a more limited extent Sweden.

Hi Stefan Would so-called helicopter money or the introduction of a base income be beneficial for attaining the inflation target? I prekariatet (13:54)

 
Reply: The concept of "helicopter money" is that everyone has access to newly-created money. Then one uses the money one has been allocated, demand increases and prices increase, that is, inflation rises. But now inflation is on its way up so I see no need to create helicopter money. This is primarily an academic discussion rather distant from reality.

Hi Stefan, it is 8 years since the repo rate was at a normal level of 4% and your forecast shows a minus rate or zero rate for several years to come, is it time to change the normal level? Fredrik (13:55)

 
Reply: We currently have no other definition of a normal rate but it will take a long time before we reach that level again.

Hi Stefan, Sweden's economy is strong, but the repo rate is -0.50%, I cannot understand how this works, or does the Riksbank know something the rest of us don't know? Anders (13:58)

 
Reply: Monetary policy has made it possible to attain this good economic development. If the repo rate had been much higher, inflation would probably have been lower, unemployment higher and growth lower. Furthermore, interest rates are low around the world and this makes it difficult for a small, open economy like Sweden's to deviate substantially from the global interest rate levels.

Hi Stefan, does a Riksbank Governor get to have a summer holiday this year? Wishing you a good summer! Patric (14:00)

 
Reply: Yes, I get a holiday, but am never completely on holiday. For one thing I follow what is happening in Sweden and abroad, and for another thing I will be attending an international meeting in China in the middle of the summer. Wishing you, too, a good summer!