af Jochnick: The current role of monetary policy
First Deputy Governor Kerstin af Jochnick takes part in a Centre for Business and Policy Studies (SNS) conference on Friday on the economic situation. There she talks about the need for a low repo rate over a long time so inflation will rise towards the target of 2 per cent.
Although the Swedish economy is relatively strong today, inflation is too low. Ms af Jochnick shows how inflation was lower at the end of 2013 and beginning of 2014 than both the Riksbank and other analysts had expected and emphasises that the Riksbank has reacted to this by repeatedly cutting both the repo rate and the forecast for the repo rate. "It is important that inflation expectations remain firmly anchored," said Ms af Jochnick.
At the same time, Ms af Jochnick emphasised that the low interest rates entail a risk of the economy developing in an unsustainable manner, as the already high housing prices and debt could continue to rise. "We are concerned that this could lead to problems for both individual households and for the Swedish economy as a whole; both with regard to the real economy and financial stability. This is a risk that we at the Riksbank have warned about for a long time," says Ms af Jochnick. She considers that an amortisation requirement for mortgages is an important step, but that more measures are needed within other policy areas to reduce the risks.
Follow the link to see the slides shown by Kerstin af Jochnick during her presentation at SNS.
