Riksbank Governor Stefan Ingves and Deputy Governor Per Jansson today visited the Riksdag Committee on Finance for the second hearing of the year on current monetary policy.
Stefan Ingves began the hearing by stating the reasons for the Riksbank’s latest monetary policy decision to leave the repo rate unchanged at -0.25 per cent: “With the support of the Riksbank’s negative interest rate and bond purchases, Sweden has had good economic development and inflation in line with the target for several years. At our monetary policy meeting in September, we could note that development had largely been as expected. Economic activity is entering a calmer phase, both in Sweden and abroad, but Swedish resource utilisation remains fairly high. We therefore considered it appropriate to maintain the direction of monetary policy in the near term and to keep the forecast of raising the interest rate from this very low level at some point towards the end of the year or start of next year,” Mr Ingves explained. At the same time, he pointed out that the Riksbank is aware of the weaker sentiment and the low level of interest rates abroad. At the monetary policy meeting, the Executive Board therefore concluded that the interest rate would probably be raised at a very slow rate over the period ahead. “In this way, we will continue to support economic activity and the development of inflation in Sweden,” said Mr Ingves.
Per Jansson began by noting that substantial monetary policy stimulation has been required to bring inflation back to the target. This policy has also contributed towards good growth, not least on the labour market, with more people in work. Mr Jansson also explained why he is doubtful over the forecast that the rate will be increased towards the end of the year or at the beginning of next year. “Inflation is fairly low, inflation expectations have shown worrying tendencies and I see no appreciable upside risks for inflation. It is true that we have slightly greater degrees of freedom now to deviate from monetary policy abroad than we did previously. But what will be the consequences if the Riksbank and the world’s leading central banks move in different directions?” asked Mr Jansson.
