Ingves: Introduction on monetary policy
The Governor of the Riksbank, Stefan Ingves, began the hearing on monetary policy held by the Riksdag Committee on Finance by describing what is happening abroad and how this affects us, as well as what we ourselves can do to facilitate economic developments in Sweden, particularly with the help of monetary policy. In this context, Stefan Ingves reported on the latest monetary policy decision, which was taken in October.
There have been dramatic developments on the financial markets since the summer. The financial unease is basically due to the public-finance problems in, above all, southern Europe. In parallel with the unease on the financial markets, there has also been a considerable decline in confidence in the world economy. Mr Ingves described developments in Europe, where the financial crisis has been followed by a debt crisis. Growth is expected to be weak in the United States and the euro area in the years immediately ahead, but will be maintained in the global economy, mainly by the so-called BRIC countries (Brazil, Russia, India and China).
Mr Ingves went on to speak about how Sweden is affected by events abroad. Sweden is affected through three main channels: through exports, through the financial markets and through the international dependence of Swedish banks. He summed up by saying that the turbulence around the world dampens Swedish growth in the period immediately ahead.
Mr Ingves then spoke about how we ourselves can facilitate developments in Sweden. The economic-policy framework in Sweden has worked well: we have stable public finances, an effective wage formation process and low and stable inflation. Sweden's economy is well equipped to meet the challenges of the future. It is important that we make the most of this strong initial position in the period ahead, and monetary policy must of course play its part in this. When unease abroad subsides, there is every chance that growth will recover. Underlying inflation is currently low. It will gradually increase towards 2 per cent as economic activity recovers. By continuing to conduct an expansionary monetary policy we can contribute to a stable development of the Swedish economy and to the normalisation of inflation and resource utilisation during the forecast period.
"Recent developments abroad have been marked by great uncertainty. Sweden is highly affected by this uncertainty. With the help of monetary policy we will do all that we can to promote stable economic development in Sweden and to ensure that inflation remains around the target and that the development of the real economy is as stable as possible. When we look back at how things went in a few years' time we should continue to be able to say that, despite the uncertainty abroad, 'Sweden was OK!'" said Mr Ingves.
