Chat with Barbro Wickman-Parak 2 July 2009
What are you going to do this summer? Henrik
Reply: I am going to take a few weeks’ holiday. I look forward to being able to read something other than all the work documents I usually read.
What can you do to create more jobs? Fredrik
Reply: The Riksbank is not able to create new jobs directly. But when we stimulate demand by means of a lower repo rate, there is better scope for employment to accelerate.
Do you believe the interest rate cuts will have an effect on the large decline in foreign trade? Andreas
Reply: The important thing for Swedish exports is that economic activity abroad picks up. We cannot influence this with our repo rate.
When the Riksbank last cut the repo rate, I heard – and I am sure my bank did too – that there could possibly be another cut nearer to summer. I have been waiting for this to happen. I was therefore surprised when my bank, Swedbank has now recently raised bot hits fixed and variable interest rates. Why have they raised them and will they cut them now after your repo rate cut? Ulla
Reply: The banks’ borrowing costs are not merely governed by the repo rate. The interest rates the banks offer to the end-customers depend on a number of other factors, such as a risk assessment. In general, there is usually a tendency to follow the Riksbank’s interest rate; when the Riksbank makes a cut the short-term mortgage rates usually follow.
Why make a repo rate forecast when you change it all the time? Gunnar
Reply: We use the repo rate path to explain our thinking with regard to monetary policy in the slightly longer term. But the path is a forecast, not a promise. When the conditions for the economy change, the forecasts also change, including those for the repo rate.
It is really expensive to go on holiday this summer. When will it be cheaper again? Catrin
Reply: If you are travelling abroad it will be more expensive when the krona is weak. Small currencies like Sweden’s are affected when there is turbulence in the world. But when the crisis wanes, we expect the krona to strengthen.
Why should those with a sensible attitude to money have to pay for cheap credit and risky borrowing? Shouldn’t the repo rate have been raised in good time instead? George
Reply: We are cutting the repo rate to support demand and to dampen the economic downturn. If production and employment pick up this will benefit everyone in Sweden.
Why were you against cutting the repo rate today?Johan
Reply: I agreed with cutting the repo rate to 0.25 per cent. But I believe that we may need to begin raising it again a little sooner than is indicated by the interest rate path supported by a majority of the Executive Board members.
Why didn't you cut the interest rate all the way to zero this time? Tor
Reply: There is no certain way of determining where the lower limit for the repo rate can go without risking problems in the money markets. The Executive Board’s assessment is that the lower limit for the repo rate has in practice been reached with today's cut.
What was it like to sit in Stefan Ingves’ seat today? Undrande
Reply: It was interesting and informative. There are six of us on the Executive Board and we are all spokeswomen/men on monetary policy issues. It is assumed that we can manage a press conference, for instance.
Has the economic downturn bottomed out? Jessica
Reply: We believe that the worst fall in production is behind us. Our assessment is that growth in production will be slightly positive next year. However the improvement in employment will not come until 2011.
Bengt Dennis has warned of lazy consumption like in Latvia. What is your comment on this? Carl
Reply: Households as a whole have increased their saving over the past year. So we do not see any such problems here.
Loose lending is at the root of the current economic crisis. Does your current action risk keeping this lending bubble going, when it will have to burst at some point? Per
Reply: The problems did not originate in Sweden and we do not have any “bubble”. We will not hold the repo rate at a low level long enough for a bubble to develop. We keep a close eye on credit expansion and many other variables when we make our interest rate decisions.
Will this repo rate cut affect long-term interest rates? Bjarne
Reply: It should be able to do so, but at the same time long-term interest rates are to a great extent influenced by movements in long-term interest rates abroad.
Hello! I wonder how things work when someone is ill, like on this occasion. Can that person vote? Is there some minimum number of how many have to be present when a monetary policy decision is taken? Thank you! Alex
Reply: If a member of the Executive Board is unable to attend the meeting he or she is not able to vote. To be able to reach a decision at least two members must be present and in agreement. Otherwise at least three must be present.
How do you think this will affect the Swedish krona, which is already extremely weak? Johan
Reply: We have no target for the Swedish krona. But a cut in the repo rate does usually lead to a weaker krona, all else being equal. However, the krona is affected by a number of other factors. In the long term our assessment is that it will strengthen.
Doesn’t the low interest rate lead to increased inflation when more people take loans? George
Reply: At present inflation is not a problem. But when economic activity recovers this could be a risk, but then we will raise the interest rate and check inflation.
Hello there, I wonder how long we will have such long interest rates? Thank you for answering Saso
Reply: The interest rate we have now is extremely low. We expect it to remain low until the end of next year. But this is a forecast and not a promise. If the conditions change, we may be forced to begin raising the interest rate earlier or later.
