Chat with Stefan Ingves 7 September 2017
Many thanks for all your interesting questions. Enjoy the rest of this autumn day! Stefan Ingves
Hi Stefan. Sweden's economy is unexpectedly strong, inflation is above the inflation target and households are continuing to borrow. Won't there a risk of overheating if the repo rate is held at -0.50% until mid-2018? (Patric 13:32)
Answer: At present, we see no risk of overheating. It has taken a long time to bring inflation up and the expansionary monetary policy is one factor making things go well for Sweden just now. Cost pressures in the Swedish economy aren't particularly high, even though growth is good.
Hi Stefan. With the historically low repo rate, households will probably continue to take on debt. Do you think that the politicians will dare to take measures now that we're going into an election year? Patric (13:34)
Answer: It's very hard to say. We're far behind in addressing these issues, which is an increasing problem.
Hi Stefan. How much was the value in old banknotes and coins that was lost on 30 June? Patric (13:37)
Answer: For the coins, about SEK 1.5 billion was never received back, but the total sum hasn't been calculated yet. For the banknotes, about SEK 4.5 billion in 100 and 500-krona banknotes is unaccounted for, but note that these banknotes can still be redeemed in banks until August 2018, so this sum will go down.
Hi Stefan! Are the negative interest rates a result of Sweden being impacted by debt deflation? Janne Larsson (13:38)
Answer: Sweden hasn't been impacted by debt deflation. The expansionary monetary policy exists precisely to avoid such a development.
Hi Stefan. Does the CPIF inflation measure apply as from right now? Patric (13:38)
Answer: Yes, it does. But in practice, it applied earlier too.
Is it reasonable to have a policy rate of -0.5% with the fundamentals Sweden has had in recent years? Thomas Andersson (13:40)
Answer: Yes, it's reasonable. You see, it's partly due to the monetary policy conducted, i.e. the low interest rate, that things look good in the Swedish economy just now.
Hi Stefan. Who has the last word in the size of the foreign currency reserve, the Riksbank or the Government? Patric (13:40)
Answer: Under present legislation, the Riksbank.
Hi Stefan. Does Sweden have the highest inflation in the EU at the moment? Patric (13:41)
Answer: No, that's not the case. Some countries have higher inflation, for example Lithuania.
Hi Stefan! How's it going with the e-krona? How far has the Riksbank come in its inquiry? Benke (13:42)
Answer: We expect to publish a report in the autumn.
Hi Stefan. As we all know, the repo rate is -0.5 per cent. But why can't I take a loan from the Riksbank at that rate? Tomas (13:43)
Answer: These days, the Riksbank has no direct customers, as we're not a normal bank. All transactions go through the Swedish commercial banks, one way or another.
Hi Stefan. Under what kind of economic circumstances could the Riksbank's gold reserve be put into use? Patric (13:45)
Answer: I can't really say in advance, but the gold reserve can be pledged quite easily and quickly if we need to borrow a lot of money in a hurry.
What would a reasonable interest rate be, 5 or 10 years ahead? As few people seem to be capable of answering that question, how should I reason myself? If you look at the interest rate as a tool for cooling down the economy, in which the cooling effect is proportional to two factors, indebtedness and interest - is it faulty reasoning for me to think that if indebtedness were to double, the Riksbank would only need to raise the interest rate by half as much to achieve the same effect? Fredrik (13:49)
Answer: Just now, interest rates in many parts of the world are very low and, if history is any guide, the present level of interest rates will not persist. A reasonable assumption would be interest rates in the interval 2.5–4%, but how long it will take to get there is very hard to predict at present.
Have I understood correctly that you won't raise interest rates ahead of the ECB? Anders A (13:50)
Answer: I can't say in advance. We'll see later on, but, naturally, we're keeping an eye on what the ECB does, as the EMU is a large and important neighbour with an influence on the Swedish economy.
Hi Stefan. A crisis always comes sooner or later. What have you learned from previous crises and do you consider that preparedness is good right now? Patric (13:53)
Answer: Our preparedness is good because we've seen crises come and go, of course, and we exercise crisis management at regular intervals. At the same time, you can never know in advance exactly how a crisis will unfold.
What's your view of indebtedness as regards mortgages among the people of Sweden? This is a social problem that can be traced back to the low level of interest rates. Adam (13:56)
Answer: Indebtedness among households is too high at present and this is an increasing risk in the Swedish economy. Low interest rates are a contributing factor, but the fact is that household debt has been increasing for a long time, even when interest rates were much higher. Above all, this is connected with the dysfunctional nature of the Swedish housing market, which is suffering from a long series of problems unconnected with monetary policy.
What are your thoughts about the unease we see on the news from abroad? Even if your forecasts and plans look okay from a domestic point of view, Sweden must be affected by external influences and the rest of the world is uneasy at present. Alex (13:59)
Answer: Sweden is a small, open economy, with exports and imports corresponding to about 50% of gross domestic product and completely free capital flows over its borders. But the conditions for monetary policy are always affected by what is happening around us. And sure, it's uneasy just now in some areas, but that's the way it's always been in a rapidly-changing world.
Economists once thought relatively rapid wage increases and weak currencies were bad things. But you don't think so. Why not? Anders (14:02)
Answer: Wages are not rising particularly rapidly today and our assessment is instead that the krona will strengthen quite slowly over the years ahead, so your question is not particularly relevant just now.
