Chat with Stefan Ingves 26 October 2017

Many thanks for all your interesting questions. We'll be back again in December. Regards, Stefan Ingves







How high do you think the interest rate will be in 10 years? Sofia and Alma (13:32)


Answer: It's very hard to know so far into the future, but let's say somewhere in the interval of 2.5–4 per cent, assuming more or less normal circumstances are prevailing then.





Hi Stefan. First, I'd like to congratulate you on your renewed mandate as Governor of the Riksbank, after which I wonder what are the greatest challenges you currently see ahead of you at the Riksbank over the next few years? Patric (13:34)


Answer: Thank you! There are always challenges, so let me list a few. Keeping inflation around two per cent once the level of interest rates has normalised, developing our payment system in an efficient and favourable manner and considering whether to introduce an e-krona now that cash is in the process of disappearing.





Why are you keeping a negative repo rate (aimed at increasing inflation) now that the level of inflation is 2.3 per cent? The inflation target is 2 per cent. Ekken (13:36)


Answer: Inflation has only very recently reached our goal of two per cent. So we'd like to ensure that inflation can also be held there and, considering this, it would be too risky to raise the repo rate yet.





Hi. On what basis is the inflation target set at 2%? Regards, Kriss Sahlin (13:38)


Answer: Two is a respectable distance from zero per cent. This lets us avoid periods of falling prices (deflation) at the same time as we avoid high and fluctuating inflation, which would probably be the case if we had a much higher inflation target.





Hi Stefan. Congratulations on a renewed term of office. Can you now officially state that our currency is pegged to the EUR, just like the Danish one is? David - AFEX (13:40)


Answer: Thank you! No, our currency is absolutely not pegged to the euro. The exchange rate varies constantly, so we have an entirely different currency system from our Danish colleagues.





Hi Stefan. How many other assignments do you have, apart from being Governor of the Riksbank? Patric (13:41)


Answer: I have, and have had, a long series of international assignments both in the EU and on a global level, but no other assignments in Sweden.





Hi Stefan. If your wishes could come true, what would you want the CPIF and repo rate to be, in a perfect world? Patric (13:42)


Answer: In that case, the CPIF would be two per cent and the repo rate would be four per cent! This would give us a form of presumably long-term equilibrium.





What do you think the immediate and long-term effects will be of an interest-rate rise on the Swedish housing market, as it appears at present? Your greatest admirer, Daniel. (13:44)


Answer: When the interest rate is eventually raised, it will become more expensive to borrow and people will probably borrow a bit less, at the same time as the development of property prices will slow down somewhat.





What effects could an interruption or termination of government bond purchases have on inflation? Will you follow the ECB's example and terminate these purchases at the end of 2017? Leinhard nidé (13:45)


Answer: We will discuss what will happen to our bond purchases as part of the next monetary policy decision in December.





If a change in the reference rate could lead to a crash or heavy downturn on the housing market, is there then, in your opinion, a systemic risk in the Swedish financial system? Could a possible downturn in housing prices lead to a recession? Örjan (13:48)


Answer: There is always a systemic risk in the Swedish financial system, as the banks are large and interconnected. In an unfavourable scenario, a heavy fall in housing prices would negatively affect consumption and general economic development, which could lead to a recession. This phenomenon can be seen in several other countries where problems have arisen on the housing market.





Now that inflation is already above the Riksbank's target (2,3% vs. 2.0%), wouldn't it be an appropriate monetary policy to start raising the repo rate now to slow down this development and not fall behind? Dag Morten Iversen, Ôsterbotten (13:50)


Answer: It's too early to start raising it now, as inflation would risk falling back under two per cent and this is not something we want. If we start to raise the repo rate in 2018, we believe the timing will be right, given what we know at present.



Do you see any risks with an expansionary monetary policy? Danielsson (13:51)



Answer: One risk that we are keeping our eyes on is what happens to different asset prices and, not least, what happens on the mortgage market.





Why do Sweden and several other central banks still have negative policy rates nine years after the financial crisis? Johan (13:53)


Answer: Global real interest rates have fallen for a long time and this, itself, leads to low interest rates. Furthermore, it has taken much longer than expected to restore inflation and growth after the global financial crisis.





Hi Stefan. How large is the foreign currency reserve and do you see any need to increase it? Patric (13:54)


Answer: In August, the market value of the foreign currency reserve was SEK 422 billion and we think this is just right.





Hi Stefan. Why are housing prices not included in some form in the measure of inflation? If they were, inflation would be over 2% now. Erland, Tranås (13:56)


Answer: These are not included as a distinct group in the CPUI, but they are included in the form of household interest expenditure and rents.





Economic boom and negative interest rates? How do these fit together? Sven (13:57)


Answer: Without the negative interest rate, we would not have such strong economic activity and probably not a rate of inflation close to our target of two per cent either.





Why do you think the politicians and FI have not introduced a tighter debt-to-income limit? This would make the debt burden increase synonymously with wages. jonas (14:00)


Answer: Debt has increased faster than incomes for a long time. This is not sustainable in the long term, and, in light of this, it is not strange that Finansinspektionen is trying to slow down the accumulation of debt.





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