Stefan Ingves in an hearing on monetary policy at the Riksdag Committee on Finance
Why do we have a negative interest rate? How is the Swedish economy developing? These are a couple of the questions that Governor Stefan Ingves and First Deputy Governor Kerstin af Jochnick will answer on Thursday when they open the year's first hearing on monetary policy at the Riksdag Committee on Finance.
Stefan Ingves presents the background to the decision to cut the repo rate to the historically low level of -0.10 per cent and to purchase government bonds in an amount of SEK 10 billion. He describes how the Swedish economy has developed relatively well and how there are signs that the low level of inflation has bottomed out. But he also points out that uncertainty has increased internationally. "The measures we have adopted, which can be scaled up if necessary, can together be seen as insurance against the risk of lower inflation and lower inflation expectations. These actions demonstrate our determination to safeguard the inflation target", says Mr Ingves. Mr Ingves also raises the issue of problems on the housing market. The increase of both housing prices and lending for housing purchases is a side-effect of the low repo rate. "It is urgent that other policy areas manage these risks", emphasises Mr Ingves.
Kerstin af Jochnick also points out how important it is for inflation to rise towards the target and gives her views on the recent years' monetary policy debate. Criticism has now clearly changed character, notes Ms af Jochnick. While this previously argued that the Riksbank ought to stimulate the economy more, that debts posed no risk and that the inflation target must be prioritised, current criticism claims that the Riksbank should stimulate the economy less, that debts are a significant risk and that the inflation target is less important. Ms af Jochnick considers that the previous criticism took the risks linked with households' high indebtedness too lightly, while the newer criticism underestimates the importance of the inflation target for the stable development of the economy.
"The policy we are pursuing is not a new type of policy, it is a reaction to a change in the conditions for monetary policy" says Ms af Jochnick, pointing to the fact that inflation has been lower than expected in recent years and that inflation expectations have fallen.
The Governor of the Riksbank and one of the deputy governors attend hearings on monetary policy at the Riksdag Committee on Finance three times a year.
