Chat with Stefan Ingves 27 April 2017
Thanks for all of your interesting questions and your great interest in our activities. Enjoy the rest of this spring day. Regards, Stefan Ingves
Hi Stefan. Why do you use the term 'employment' when its definition is that you're counted as employed even if you only work one hour per week? Regards, Christer (13.30)
Response: We use the conventional definition of employment, but we also keep track of hours worked, so when we see that there are few hours worked, we can conclude that many people are employed part-time.
At the height of an economic boom, why is the target of 2% CPIF (CPI) worth the risk involved in intensively stimulating the economy with a negative repo rate and bond purchases, as compared with having a low and stable CPIF of between 0–2%? Terje (13.32)
Response: 2% is a good target that we've long been agreed on in Sweden. However, it's not possible to achieve exactly 2% all the time. You have to expect that inflation will vary quite a lot around 2%. The important thing is that we end up fairly close, on average.
Hi Stefan. Why has the Riksbank cut what's known as the ‘normal interest rate’ by 0.5–1%? Patric (13.37)
Response: It took a long time for both nominal and real interest rates to fall over the whole world. When international interest rates then started to rise, there was also good reason to believe that the rise would be pretty slow. In light of this, it's reasonable to expect interest rates to rise slowly in the period ahead, in which case it's also natural to adjust the normal interest rate downwards. The real interest rate is not determined by the world's central banks, but is rather connected with the large supply of savings and low investments.
Hi Stefan. When did your interest in monetary policy begin and do you take work home? Patric (13.38)
Response: I’ve been interested in economics and economic policy since I was at middle school in Finland in the 60s.
The NIER says that economic growth is significantly stronger than normal. The Riksbank is continuing with QE and historically extremely low interest rates. What does My Lord the Master of the Mint think of the risks of an overheated economy? Johannes (13.40)
Response: The Master of the Mint considers that inflation is still not too high. In this sense, the economy is not overheated. And it certainly doesn't do any harm for things to be going well for Sweden in a general sense.
Hi Stefan. In two months, SEK 15 billion in cash will become invalid, while the Riksbank is purchasing further government bonds in an amount of SEK 15 billion. Are these connected? Patric (13.41)
Response: It’s an entertaining observation but no, there is no connection!
Hi Stefan. To what extent do you comply with the ECB's decisions? Erik (13.42)
Response: We take note of what the ECB's doing as we are neighbours with an enormous currency area, but we decide Sweden's monetary policy completely by ourselves.
Hi Stefan. Do you have any more public functions than Governor of the Riksbank, perhaps outside Sweden? Patric (13.44)
Response: Yes, lots. Among other things, I’m a board member in the Bank for International Settlements, I’m chairman of the Basel Committee on Banking Supervision etc.
We had our own release parties at home to celebrate the new banknotes. Among other things, we had canapés with a banknote theme, a banknote quiz and a make-your-own-banknote corner. Do you encourage things like this? Hanna (13.45)
Response: I hope you had a nice time!
Hi Stefan. Bank economists write that Swedish households’ net wealth has never been higher. Do you agree? Patric (13.47)
Response: That’s probably true, but, at the same time, debts are record-high and liabilities and assets are not at all evenly distributed. For example, many young people have large liabilities and many older people have large assets.
Hi Stefan. Is low inflation a European problem or is it like this in most of the world? Patric (13.48)
Response: It's not just a European problem, it was also like this for a time in the United States, where inflation is now on the way up. And, not least in Japan, inflation has been very low for a long time.
The CPIF (CPI) is being affected by new extraction methods in the oil industry causing oil prices to fall, car production being moved to low-income countries causing car prices to fall, new production methods for fridges causing prices to fall, new technology being developed for cheaper solar panels for greenhouses causing the price of vegetables to fall. Doesn’t the above show that the CPIF is a very poor parameter by which to govern the repo rate? Terje (13.51)
Response: The CPIF and the CPI capture a wide basket of goods and services in Sweden very well. It will always be the case that some prices will rise while others fall. Here, it has been the case for quite long that service prices have risen much more rapidly than goods prices.
Do you see any problems with the increasing number of businesses that have stopped accepting cash? Anton (13.53)
Response: In the short term, this could be a problem in certain cases. At the same time, technological progress is such that increasing numbers of people are choosing to make electronic payments instead. Just now, this is, above all, an issue of how we are to manage the transition from cash to electronic payments and, at the same time, ensure that it doesn't go too fast for some members of society.
Hi! Core inflation has been low for six years now. Despite the economic boom, inflation is not reaching 2% in the western world. As Governor of the Riksbank, do you feel concerned that participants in the economy are losing faith in the 2% target? Harald (13.56)
Response: No, I don’t. Inflation expectations five years ahead are now very close to two per cent and we are on the way up to two per cent inflation, so it will probably also work this time too, even if it has taken a lot longer than we expected a few years ago.
What do you see as the risks of low interest rates, apart from household indebtedness? For example, are there any companies just now that wouldn't be able to cope with a higher level of interest rates? Erik (13.58)
Response: There are always companies that are refused loans, whatever the level of interest rates. Above all, this is connected to whether or not the business is profitable in the long term.
Hi. If you raise the repo rate, will savers with money in their accounts get a higher yield? If so, how much would savers get if you were to reach your goal of 2%? sixten (13.59)
Response: Statistics show that deposit rates will rise if we raise the repo rate, but they do not have to correspond one-to-one.
