Ingves: Introduction on monetary policy
Governor Stefan Ingves began the hearing on monetary policy at the Riksdag Committee on Finance by describing where we have come from, where we are now and where we are heading, as well as the motives for the repo rate decision made by the Executive Board of the Riksbank a couple of weeks ago.
Today, we know that the financial crisis mainly manifested itself in Sweden in the form of decreased demand from abroad. World trade fell heavily, as did Swedish exports. Sweden is a small, open economy that is very export-dependent, and GDP fell by more than 5 per cent in 2009, which was the largest fall since the Second World War.
Swedish GDP growth is currently very high from both a historical and an international perspective. According to new figures, GDP growth amounted to 5.5 per cent in 2010. This is the highest growth since 1970. There have thus been very large fluctuations in the economy in recent years. After developments in 2009, which entailed the sharpest fall in GDP since the Second World War, we have instead experienced, in 2010, the greatest increase in GDP in 40 years. Sweden is now among those economies with the highest GDP growth rates in the world. At the same time, the indicators are very strong, suggesting continued high levels of growth throughout early 2011.
The recovery of Sweden’s economy after the financial crisis has now made considerable progress. Output has largely returned to the pre-crisis level, and unemployment is in retreat. Our assessment is that the high growth rate in the economy will gradually decrease in the period ahead and will approach normal levels. The labour market is on the road to recovery, and unemployment is falling. World commodity prices are rising, and resource utilisation is increasing, which will contribute to higher inflation in the coming period. The Swedish economy and monetary policy are normalising. A balanced development of the Swedish economy assumes a gradual increase in the repo rate towards more normal levels.
Read the entire speech in the PDF file below.
