Hearing on monetary policy in the Committee on Finance

Hearing on monetary policy in the Committee on Finance

Photo: The Riksbank

An open hearing of the Riksdag Committee on Finance on the RIksbank Account of Monetary Policy 2018 was held on 2 May The Riksbank report forms part of the material for the annual assessment of monetary policy by the Riksdag Committee on Finance.

The Riksbank Governor opened the hearing by summarising the report (click here for Ingves’ presentation in English) and pointed out that target attainment had been good in recent years, CPIF inflation was at 2% in both 2017 and 2018. At the same time, economic activity has been strong and the employment rate has been at the highest level for more than twenty years. During 2018, however, energy prices contributed a lot to CPIF inflation and there were questions regarding the strength of inflationary pressures during the year. But there were good conditions for inflation being around the target level and in December the Riksbank raised the repo rate for the first time since 2011. 

First Deputy Governor Kerstin af Jochnick discussed the basis for the monetary policy conducted by the Riksbank in recent years (click here for af Jochnick’s presentation in English). “I believe there is general agreement that the inflation target has been good for Sweden, but sometimes arguments arise in the debate that do not seem to agree with this. If one advocates a different system for monetary policy, it would be interesting to hear how this would look and how it would outweigh the benefits with an inflation target,” af Jochnick said. The level of the target has been debated more, but she noted that lowering the target below 2 per cent would make it more difficult for the Riksbank to counteract economic downturns. 

Mundus Weekly

During the hearing, Riksbank Governor, Stefan Ingves, was challenged by SEB’s Chief Economist, Robert Bergqvist, who said that “the Riksbank has, on the one hand, talked down the value of the Krona in speeches and comments from members of the board of directors … but, in the Riksbank’s monetary policy reports, the forecasts have at the same time pointed to a stronger Krona exchange rate. Such talk was “Unclear, asymmetrical and harmful”, Bergqvist warned. It causes concerns about efficiency losses in Swedish exports, and thus Sweden’s long-term competitiveness, if exporters are shielded by a weaker Krona from protection from competition from other countries. Another negative effect is that the weak Krona erodes the purchasing power of Swedish households and import companies. At the same time, prices for companies, securities and properties in Sweden tend to be reduced, Bergqvist warned:. “We are selling out Swedish assets”, Bergqvist said.