Stefan Ingves: The economic situation – Starting point for current monetary policy
Inflation is very low in many countries around us. As a result, several central banks are pursuing a very expansionary monetary policy. The situation with low inflation and low interest rates is therefore not unique to Sweden. This is being pointed out by Governor of the Riksbank Stefan Ingves when he speaks at the Affärsvärlden event Bank & Finans 2016 on Tuesday.
Small, open economies like Sweden are strongly dependent on the world around and cannot ignore developments in other countries or the level of international interest rates, as these influence Swedish growth and employment – and hence inflation. The international situation and low energy prices are prolonging the period of low inflation in Sweden. This increases the risk of confidence in the inflation target being undermined. This is why the Executive Board cut the repo rate on 10 February.
The low interest rate level has helped strengthen the Swedish economy, reduce unemployment and push up both inflation and inflation expectations. At the same time, low interest rates have also contributed to inflated balance sheets and rising debt among households. This must be addressed to avoid poor economic development further ahead.
We find ourselves in a very unusual situation with many considerations. But the inflation target is a common benchmark that has helped create stable ground rules in the economy for over 20 years – and it is important to defend.
Follow the adjoining link to see the slides Mr Ingves is showing at the Affärsvärlden event.