Ingves tough message to highly leveraged households – Swedish Dagbladet

the Riksbank has remained high preparedness to act if inflation would fall back. “The toolkit is not in the closet. We can continue to use the tools we have. “Said Stefan Ingves on Wednesday. Photo: Tomas Oneborg

Riksbank meets all more criticism for its monetary policy. Observers warn that negative interest rates is not working but on the contrary creates imbalances in the economies.

When Governor Stefan Ingves on Wednesday announced the latest interest rate announcement, he defended minus the interest. Inflation has risen steadily each Ingves news.

– the rate had been significantly higher had we probably had a much stronger exchange rate, lower growth and higher unemployment, and it had, in turn, made it more difficult to bring inflation to 2 percent.

a significantly higher rate of interest is another thing, what would have happened if you stopped at zero and not decreased to minus 0.5 percent?

– it is difficult to talk about it. Now we have minus 0.5 percent. The combination repo and support purchases of government bonds have proven to be successful because it has brought down the whole level of interest in the Swedish economy. We think that monetary policy has worked, says Stefan Ingves.

Wednesday’s rate decision from the Riksbank was, as expected, undramatic. The repo rate is left at minus 0.5 percent, the first increase will first of about a year. Support purchases of government bonds continues according to plan.

We believe that growth will be good over the next few years and unemployment is falling.

Again Stefan Ingves warned that low interest rates increases the risks associated with household debt and called for political action. But the fact is that negative interest rates and support purchases of government bonds creates far more risks than that. On a direct question about which more risks Stefan Ingves sees, in addition to household debt, the answer is the life insurance companies.

– If real interest rates are low or negative, it is not certain that you can get the return that many policyholders have imagined . It is important to be aware of what it means to live in a world of very low interest rates.

Urban Hansson Brusewitz, new Director General of the National Institute of Economic Photo: Magnus Hjalmarsson Neideman

another possible risk is that it proves that the Riksbank has taken in too much. The economic wheels spinning fast now, and in an interview with SvD warned NIER Director General of Urban Hansson Brusewitz for companies and especially the public sector has been hard to find staff.

The prices in Sweden are also rising now, the domestic inflation is under Swedbank chief economist Anna Breman, a bit over two percent. At the same time many countries in our business environment remained weak. Breman has described it as the Riksbank stands with one foot on hot coals and the other in an ice bucket.

guess we have a world with greater sensitivity to interest rates than we have had in the past .

But Stefan Inge believes not Riksbank’s expansive monetary policy overheat the economy.

– not what we can see in the current situation . We believe that inflation is two per cent during the course of next year, we believe that growth will be good over the next few years and unemployment is falling. It may be described as a generally good economic development.

What would you do if domestic prices took more speed, while it is shaky in the world?

– we have an inflation target of 2 percent, and it would appear that inflation will be very much higher, then we have to raise interest rates.

are you going to raise rates?

– Obviously, if inflation is well above 2 percent. That is our mission.

In such a situation, how much consideration you will take that households have much higher debt now?

– It is the reason we many times have warned that there is another world when interest rates rise. If households borrow very much it will affect their consumption when interest rates rise. At a guess, we have a world with greater sensitivity to interest rates than we’ve had before. But we will not fail to raise rates only for one or two households find it troubling.

On Wednesday, told Stefan Ingves also that the Riksbank is working on a report on how the the inflation target can be changed. It is about the size inflation can be measured and how the so-called tolerance range can look.

Earlier it was said that the inflation target was 2 percent, plus or minus 1 percent. SvD wrote that the work in progress and now confirms Stefan Ingves that the Executive Board has already informed the politicians of the General Council on the matter. But the decision is delayed.

– It seemed natural to inform delegates about the work.

If you want to change the size or re-introduce a tolerance range, it is a decision that can be taken of the Executive Board?

– Yes.

is it reasonable to believe that the decision taken in the next year?

– we’ll see later on.

A question wanted Stefan Ingves does not answer.

Your current mandate expires at the end of next year. Would you be prepared to sit for a third term?

– It’s a question that I have no comment at all in the current situation.