af Jochnick: Current monetary policy and the economic situation
"Economic developments in Sweden look positive and the Riksbank's expansionary monetary policy is continuing to support the upturn in inflation." This comment is made by Kerstin af Jochnick as she talks about this summer's events at a breakfast seminar arranged by the Centre for Business and Policy Studies (SNS).
Not unexpectedly, Greece has been in the spotlight during the summer. A new 3-year bailout programme can hopefully soon be in place, providing hope for continued economic recovery in the euro area. Furthermore, developments in the global economy since July essentially support the Riksbank's assessment that international growth is gradually strengthening.
The Swedish economy has also gradually improved as a result of better international demand - and inflation has been rising for a while now. Ms af Jochnick stresses the importance of monetary policy underpinning the upward trend in inflation, so that the inflation target remains a benchmark for price-setting and wage formation.
"The interest rate needs to be very low to avoid the risks associated with too low an inflation rate. At the same time, the low interest rate is leading to the build-up of other risks that can cause problems in the Swedish economy further down the line," Ms af Jochnick adds. Household debt and housing prices are rising rapidly, which can make the Swedish economy vulnerable if economic activity were to weaken. There are several reasons for the increase in debts and housing prices. One is the shortage of homes in metropolitan areas and growth regions.
"It is very important for the Swedish economy that we find a long-term sustainable solution to developments in indebtedness and housing prices. As part of this solution, the Government should ensure the development of an efficient framework for macroprudential policy and give Finansinspektionen a clear mandate to manage it," concludes Ms af Jochnick.
