Ingves: Swedish monetary policy experiences after the global financial crisis: What lessons are there for other countries?
riks, RIX-INST, commercial paper

Ingves: Swedish monetary policy experiences after the global financial crisis: What lessons are there for other countries?

October 16, 2019

“The last decade has provided lessons and experiences on many different levels. I would like to review three aspects concerning developments in Sweden since the financial crisis, give my personal reflections on them and indicate what lessons I think there are to learn.” These were the words of Governor of the Riksbank Stefan Ingves when he gave a speech at a conference arranged by Money Macro and Finance Research Group in London on Tuesday.

The first aspect highlighted by Stefan Ingves was that the Riksbank is probably the only central bank which, at least for the time being, has needed to abandon the strategy of “leaning against the wind” – using monetary policy to try to counteract the build-up of financial imbalances – due to weakening confidence in the inflation target. The second was that the policy required from the Riksbank to bring inflation back to target has sparked unusually lively debate, despite its sole aim being to meet the inflation target, that is, to fulfil the Riksbank’s actual remit. The third aspect was that the use of cash is declining more rapidly in Sweden and is currently lower than in any other country.

“Regarding the first aspect, I personally think that a policy of “leaning against the wind” can very well be justified under normal circumstances. However, it is a policy that is difficult to maintain in situations where confidence in the inflation target is under threat. In this sense, it can be seen as a “fair-weather” policy, the Governor said.

“As regards the intensive debate on the expansionary policy in recent years, it can be good to have a system whereby the monetary policy remit and the policy objective are reviewed at regular intervals. This would create better understanding and legitimacy for the monetary policy conducted and clarify that the central bank is performing its remit. I also believe it can be the right way to go to counteract the forces that seem to exist in many parts of the world to make central banks less independent”, Stefan Ingves added.

As regards the decline in cash use and the effect on monetary policy, there are not so many conclusions to draw as yet”, he noted. What we can say for certain is that an e-krona would affect the conditions for monetary policy quite drastically, regardless of how it is designed. The move by many other countries to examine the scope for introducing e-money is sensible, as one of the lessons that nevertheless can be learnt from developments in Sweden is that cash use in society can decline very rapidly”, The Governor concluded.

Read the Governor’s speech “Swedish monetary policy experiences after the global financial crisis: What lessons are there for other countries?”.

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