Skingsley: A year of negative interest rates. Where do we stand?
“It is time to take a longer view now that resource utilisation in the Swedish economy is almost normal and the inflation trend is towards the target. In this type of situation it is not necessary to make monetary policy even more expansionary, I think it is reasonable to begin to look at developments further ahead.” This comment was made by Deputy Governor Cecilia Skingsley, speaking at Danske Bank today.
"I do not see this as advocating a new monetary policy strategy for the Riksbank. Instead I would describe it as a natural consequence of the change in the economic situation and inflationprospects," continues Ms Skingsley.
She points out that at the end of 2014 and beginning of 2015, the Riksbank was in a situation that required greater focus on short-term inflation developments and measures to uphold confidence in the inflation target. The repo rate cuts and bond purchases were therefore justified.
Nor does she rule out the possibility of further stimulation if the recovery and inflation show a poorer development than expected.
"My point is that the global conditions for growth will gradually improve and that the course of inflation will normalise. However, this depends on decisions made abroad, which govern the real interest rate that we in Sweden have to relate to," emphasises Ms Skingsley.
She explains that the conditions for growth in Sweden also depend on the ability of the Swedish economy to adapt to new conditions. Monetary policy can function as a bridge over to a new normal situation. "But the new normal will be determined by decisions that are beyond the central banks' control," concludes Ms Skingsley.
Read the entire speech "A year of negative interest rates. Where do we stand?" and see the slide presentation from Cecilia Skingsley's talk at Danske Bank via the adjoining links.
