Chat with Stefan Ingves 15 February 2017
Many thanks for all of your interesting questions this beautiful winter's day. Regards, Stefan Ingves.
Hi Stefan! I'm taking a course in Economics just now and have a few questions. Is it normal for the Riksbank to conduct market operations on the bond market? What risks do you see when the Riksbank buys and sells government bonds? Catarina (13:31)
Answer: No, not over a longer period, but in recent years we have done this on a large scale. It entails an interest-rate risk for us, but this interest-rate risk is not particularly large in relation to our equity, so the risk is manageable.
Hi Stefan. Why do you write that it is more likely that the repo rate will be cut than raised in the period ahead, even though inflation is rising faster than in your previous forecast? Patric (13:32)
Answer: It is primarily uncertainty over the future that 'created' this curve. This time, there was no reason to change the path, compared with December.
Hi Stefan. Now that the negative interest rate has had its second 'birthday', do you expect it to have a third one? Patric (13:33)
Answer: According to our repo-rate path, we will have a negative repo rate for about four years.
Hi Stefan. What do you expect and hope that Friday's CPI figures from Statistics Sweden will show? Patric (13:34)
Answer: That the figures correspond exactly with our forecast!
Hi Stefan. When is it most enjoyable being Governor of the Riksbank, despite the constant criticism? Patric (13:35)
Answer: Every day! With my background and my interests, it's like getting to play with a model railway every day!
Hi Stefan. Is it primarily energy prices that are pushing inflation up at the moment? Magnus (13:36)
Answer: Yes, in the most recent months, energy prices have had great significance, but other prices are also rising, albeit pretty slowly.
Hi Stefan. How will Sweden's economy be affected by Donald Trump and Brexit? Magnus (13:38)
Answer: It's very difficult to measure in figures right now, but if trading restrictions are increased, for example, this will be negative for a small, open economy like Sweden's. But we don't know yet if this will actually happen.
Hi Stefan. Here comes the standard question about whether a normal level for the repo rate should be about 4%. Does this still apply? Fredrik (13:41)
Answer: In the Monetary Policy Report, we discuss this matter and conclude that, over the long term, the repo rate will be within the interval of 2.5–4 per cent, which is a little lower than we previously considered. Many other central banks have made about the same assessment.
Hi Stefan. How much cash is there in Swedish society just now and can our society function completely without cash? Magdalena (13:44)
Answer: I don't have the exact figures in front of me, but it's about SEK 60 billion, and, with today's technology, a society can probably function pretty well without any cash. Almost all payments today are already electronic in one form or another. On the other hand, in practice, it will be a good time, if ever, before cash disappears.
Why does the Riksbank have a gold reserve and how large is it? Rut (13:46)
Answer: Gold is nobody else's liability and is good to have, particularly in bad times, and this is how it's always been. At present, the Riksbank has 126 tonnes of gold, which is about 10,000 bars. Their value is about SEK 42 billion.
Hi Stefan. Who decides the inflation target and can it be lowered? Fredrik (13:49)
Answer: The Riksbank, supported by the Riksdag (the Swedish parliament) determines the inflation target. This is how it's been since the mid-1990s. The target could theoretically be adjusted upwards or downwards, but, since the target was introduced, there has been no reason to do this. It's been a steady 2 per cent all the time.
Hi Stefan. Almost everybody is warning about households' high level of indebtedness but whose job is it to deal with this problem?
Answer: Ultimately, this is a matter for individual households, banks and Finansinspektionen (the Swedish financial supervisory authority), but, above all, it is also a matter for the politicians in terms of tax and housing policies.
Hi Stefan. Can the Governor of the Riksbank make plans for a summer holiday or to you have to constantly be available? Patric (13:52)
Answer: These days, I'm always available, even when I'm not at work. But, with today's communication possibilities, this doesn't have to mean that I have to spend the whole summer sitting at the Riksbank.
Hi Stefan. Does Sweden have higher or lower inflation than other countries in Europe? Patric (13:53)
Answer: Just now, Sweden has slightly higher inflation than the average in Europe.
What is the single most important factor giving us such low inflation? And shouldn't these prices bottom out at some point too? Fredrik (13:56)
Answer: Several factors play a part. One important factor was the global financial crisis, which created a global and, in many places, persistent downturn. With our large exports and imports, it is almost impossible for a small, open economy like Sweden's not to be affected by it.
Hi Stefan. Is the Riksbank still investigating the possibility of offering Sweden and the world the e-krona service in the future? Janne (13:57)
Answer: Yes, we're hard at work on this matter. At present, it's too early to say what the final result will be.
The Riksbank affects the money supply. The inflation target, which is measured in terms of the CPI/CPIF, is the price of goods. The price of goods isn't just affected by the money supply but also by supply/demand/rationalisation/globalisation etc. Why does the Riksbank have a target that it can't control to 100 per cent? Wouldn't it be wiser to only measure the money supply that you can fully control? Ivan Lapitski (14:01)
Answer: We can't control the rate of inflation in detail, but low inflation is definitely better than high and varying inflation. That's why we have an inflation target. Before, many people attempted to control inflation via an indirect money supply target, but it didn't work as well.
