The Riksbank cut the repo rate to minus 0.1 percent in February. If the historical rate cut is not enough to bring inflation to the target of 2 per cent, then Ingves ready to open a large tool box.
The options are to cut rates further expand its purchases of government bonds and lend to companies through banks.
In the current situation, the Riksbank can buy government bonds on the secondary market for 10 billion. It is not a large amount in context, emphasizes Ingves.
– We can use our balance sheet with force, if necessary, he says in a hearing of the Parliamentary Finance Committee.
– In a technical sense, we can buy just as much as we need.
Another tool to bring inflation is to buy foreign exchange, although it is not the first choice.
– But nothing is out of the question, because we are quite far from any sort of normality in terms of inflation, says Ingves.
Since the rate cut krona has strengthened continuously. It’s not what the Riksbank hoping for. On the contrary, the hope was that a weaker exchange rate would help to bring inflation through rising import prices.
The krona appreciated is unwelcome, admits Ingves, but he does not want to put too much emphasis on the exchange rate.
– I can not say I’m worried, says Ingves.
– We have a floating exchange rate and the crown moves must be expected.
Ingves opinion is that it there are signs that inflation has now bottomed out.
So far, the Riksbank’s less interest not led to negative interest rates on bank customers’ savings accounts.
– We do not believe that it will happen, says Governor .
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