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Chat with Stefan Ingves 4 July 2017

Thank you all very much for so many good and interesting questions. Wishing you a pleasant summer day. Regards from Stefan Ingves

Hi Stefan, Is it not possible for the Riksbank to create a separate interest rate for households to dampen household indebtedness? Patric (13:32)

Reply: The way the financial sector functions today, it is difficult for us to do what you suggest. The simplest solution would be to abolish the tax deductions for interest-rate payments. Then the interest paid would be higher without us needing to raise the interest rate.

Hi Stefan, Will the Riksbank's measure of inflation be changed from the CPI to the CPIF? Patric (13:33)

Reply: This is something we will decide on in the autumn.

Hi Stefan, Why is the foreign currency reserve being reduced, isn't it necessary to keep it at the current level, given our large banking system? Patric (13:34)

Reply: We at the Riksbank do not think the foreign currency reserve should be reduced. We need the currency reserve that we have now.

Hi Stefan, Will the Riksbank's gold reserves be changed at all in the near term? Patric (13:35)

Reply: No!

Hi Stefan, Are Swedish banks sufficiently well-equipped for the possibility of the housing bubble bursting? Patric (13:36)

Reply: Yes, they are well equipped, but it is never possible to know for certain whether this will be enough.

Hi Stefan, The Swedish economy is strong and inflation has almost reached the target level, why are you waiting to increase the repo rate? Patric (13:37)

Reply: Interest rates abroad are also very low, which affects us, and then we also want to be sure that inflation will really stabilise around 2 per cent. So it is too early to raise the repo rate now.

Hi Stefan, The Riksbank usually says that it is important that households do not borrow too much, haven't we already passed that level? Patric (13:38)

Reply: Yes, in my opinion we have already passed that level.

Hi Stefan, The Riksbank has bought government bonds for SEK 290 billion and cut the repo rate to -0.50%, can you become more expansionary without jeopardising the Swedish economy? Patric (13:40)

Reply: Certainly, monetary policy can become more expansionary if it is necessary and this would then be good for the Swedish economy. Our basic scenario is, however, that the repo rate will remain unchanged until next summer, after which it will be raised gradually.

Hi Stefan, Do you use cash privately or do you believe that cash will disappear within 10-15 years? Patric (13:41)

Reply: Cash will most likely exist in the future, too, but will probably be used less than today. Personally, I use cash less and less just like many other people.

Hi Stefan, If you were a sailor and the sea was the current economic situation, would you then go out to sea? Alexandra (13:43)

Reply: Yes of course, but at this time of year one needs to be prepared for sudden storms and even the odd thundershower. But, when it comes to monetary policy we don't have the choice of going ashore from time to time, we keep on sailing, in all types of weather!

Does the Riksbank recommend that the Government should abolish the tax deductions for interest payments? Kevin (13:44)

Reply: Yes!

Hi Stefan, How much old cash became invalid on 1 July? Patric (13:46)

Reply: When we began the changeover, the value of the outstanding cash in 100 and 500-krona banknotes was SEK 60 billion and the value of the outstanding coins was SEK 2.7 billion.

Hi Stefan, Can you see the Riksbank having a repo rate around 4% again in the future, or does this belong to times gone by? Patric (13:47)

Reply: It is difficult to say. In the near term, the coming years, it is very unlikely that the repo rate will rise to 4 per cent.

Is it fair to conclude that the Riksbank has now fully removed its easing bias? Nina Adam, The Wall Street Journal (13:49)

Reply: It is a bit less likely than in the past that we will lower the policy rate, but this does not rule out cuts if the economic conditions warrant further cuts in the future.

Hi Stefan, Did you have any important mentors in the early part of your career? Patric (13:50)

Reply: Odd Engstrom and Marcus Storch when I worked at the Swedish Bank Support Authority a long time ago.

Is there any other country than Sweden that currently has a negative interest rate? How do things look in our neighbouring countries? Robert (13:52)

Reply: Finland, within the EMU, and Denmark currently have negative interest rates.

Hi Stefan, Are there any particular prices pushing up inflation right now? Patric (13:53)

Reply: At the moment prices of various different types of service are rising faster than other prices.

When is the next repo-rate decision? Patric (13:55)

Reply: The next decision is planned for 6 September and it will be published in a press release the following day.

Hi Stefan, Is the Riksbank's monetary policy affected by the FED raising its policy rate? Patric (13:56)

Reply: It is to some extent, as very many economies are affected by developments in the United States and by the Fed's rate-setting.

We can currently see high housing prices in the household sector that are pushed up by unsustainable growth in debt. If the necessary measures are taken to reduce growth in debt to sustainable levels, what will happen to housing prices? And will a fall in prices really entail danger for financial stability, given households' assets? Bo (13:57)

Reply: Both stagnant prices and a moderate fall in prices are manageable. But if prices were to fall rapidly and substantially, this could unfortunately create major problems in the Swedish economy.

Hi! Does the end of the quantitative easing mean that Sweden will instead use fiscal policy in the future instead of monetary policy? Yazan (13:59)

Reply: It is almost impossible to answer this question. We are still buying government bonds. Fiscal policy is managed by others and monetary policy is not coordinated with fiscal policy.