Stefan Ingves. Photo: Linus Sundahl-Djerf
Riksbank’s rate cut by 0.15 percentage was expected, although some experts had predicted a slightly smaller reduction.
the krona weakened after the rate announcement. The new negative interest rate of 0.50 per cent means that a step further towards unknown lands have been taken. And this time it was not the Executive Board agrees decision. Two of the members, Henry Ohlsson and Martin Flodén wanted to leave the rate unchanged.
The Governor Stefan Ingves defends However, the interest rate reduction, and stresses that the decision was taken to safeguard the inflation target of 2 percent.
– On the one page continues the economy strengthened, but on the other hand, the Riksbank has unfortunately had to revise down its inflation forecast, says Stefan Ingves during the press conference.
He notes that the inflation target is more distant than was thought at the last interest rate meeting in December. And the period in which inflation fell below the target will be longer than the Riksbank had previously believed.
– The forecast has been revised down due to lower energy prices and lower rent increases, said Mr Ingves.
His message during Thursday’s press conference was partly a repetition of the past. He reiterates that the monetary policy will benefit.
– The very expansive monetary policy means that inflation continues to rise and that we will get inflation up to 2 percent, he said.
Stefan Ingves also addressed the importance of having a clear inflation target and to stick to it. He said that the goal “is a cornerstone of Swedish policy,” which makes it easier for companies and households to make decisions and lay the foundation for sustainable growth.
However, noted the Governor that inflation may appear choppy and pointed out that the can continue so, especially considering how the world looks. He pointed out that it had happened a lot since the December meeting, and took up falling oil prices, stock market declines in several parts of the world, uncertainty about China and other emerging countries. In addition, an expectation of more expansionary monetary policy in the world.
– Sweden is a small open economy, and we must relate to monetary policy in the rest of the world, he said.
If the Swedish krona become too strong inflation target would be difficult to achieve, and the interest rate in Sweden can not deviate significantly from the rest of the world.
– the world looks different today than in December. It is more worrisome today, said Mr Ingves.
However, he did not agree with those who argue that the Riksbank is at the mercy of the market when they are forced to act according to what the market expects to avoid the appreciation of the krona. He avoided even to get to grips with the question of whether there are risks associated with talk of new stimulus measures from the ECB presses the Swedish Riksbank to act again.
– They have their goals, we have our target. They get up inflation in Europe is not to the detriment of Sweden, he says.
He also reiterates that the Riksbank is prepared to do more as there may be setbacks for inflation. He also says that it is bereddda to intervene in the market.
He also discusses the risks of low interest rates, and he recalls that it is increasingly urgent to take measures to curb household debt in Sweden.
– It is state that we do this in the Swedish economy, said Stefan Ingves and aimed at household debts.
Riksbank rate decision was quickly criticized. SEB’s Chief Economist Robert Bergqvist believes Riksbank’s monetary policy has passed the “best before” date and no longer are particularly effective. The lower the interest rate is, the more eroded becomes the interest rate, while it begins to arise a fear of an even more negative interest rates, because the highly expansionary policy creates long-term risks.
– The two members did not want to cut the repo rate is a signs that they are beginning to question the effectiveness of monetary policy, he said, calling the announcement “a depressing decision.”
Even Annika Winsth, chief economist at Nordea is skeptical of the monetary policy and sees risks in the interest rate has been so negative as it is now.
– Free money involves a risk, she says, noting that less interest rate risk contributing to bad investments and excessive debt in households.
she believes that it becomes difficult for the Riksbank to continue to cut rates.
– I think that interest rates are on the ground here, ‘she says.
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