Ingves at the Riksdag Committee on Finance. Hearing on monetary policy
Our monetary policy has contributed towards strengthening Sweden’s economy. This is the message of Governor Stefan Ingves and Deputy Governor Per Jansson when they take part in the year's second hearing on monetary policy, today at the Riksdag Committee on Finance.
Stefan Ingves will open the hearing by noting that monetary policy is functioning well and providing support to the Swedish economy. Economic activity is strengthening and inflation is rising. At the same time, he points out the high international dependence of the Swedish economy. The recovery of global economic activity remains fraught with uncertainty at the same time as monetary policy is still highly expansionary. "The low level of interest rates abroad is spilling over into Sweden and is something that Swedish monetary policy must relate to", says Mr Ingves, who also mentions the significance of the exchange rate on the development of inflation in this context. As previously, Mr Ingves also addresses the problems on the Swedish housing market in his introduction. "Interest rates need to be low now to defend the inflation target. At the same time, household indebtedness is continuing to increase, which is not sustainable in the long term. In this respect, we are living dangerously in Sweden," says Mr Ingves. Consequently, if economic development is also to be stable in the longer term, measures are needed from other policy areas to restrict the growth in household debt, Mr Ingves concludes.
Per Jansson looks back on the situation at the start of 2015 in his introduction. The low rate of inflation then had an impact on inflation expectations, which increasingly diverged from the target. At the same time, there was a risk that the low interest rates abroad would lead to a heavy appreciation of the krona, which would not only harm the possibilities of bringing inflation up but would also weaken the competitiveness of Swedish exports. "The risks existing in the spring of 2015, when the ECB started its major asset purchases, were underestimated by many – it was a dangerous situation," says Mr Jansson. The Riksbank's monetary policy, with a negative repo rate and purchases of government bonds, has contributed towards the situation now looking better. But inflation prospects need to improve somewhat before we can feel secure, he concludes.
