1982 - Bengt Dennis becomes Governor of the Riksbank

Bengt Dennis

Under Bengt Dennis, the marginal rate was raised to 500 per cent for a couple of days in 1992. The fixed exchange rate was replaced by a floating one. Dennis also managed a financial and banking crisis and introduced the Riksbank’s inflation target.

Bengt Dennis (born 1930) was born in Grängesberg. He gained a master's degree at Columbia University in New York and then worked for the Ministries of Finance, Foreign Affairs and Trade. In 1981, he became editor-in-chief of the newspaper Dagens Nyheter before, only a couple of years later, being appointed new Governor of the Riksbank by Olof Palme.

At the start of the 1970s, Bretton Woods, a system involving national currencies being pegged to the value of gold, had collapsed. This collapse meant that the value of many of the world’s currencies became dependent on international confidence. When Bengt Dennis took office, Sweden's monetary policy was still being reformed. Only weeks previously, the Government had decided to devalue the Swedish krona  by 16 per cent. However, after the devaluation, both inflation and wages continued to rise.

The start of deregulation of the international financial systems made it easier for the banks to lend larger amounts of money. In 1985, the Swedish banks’ previous loan cap was abolished. The result was that indebtedness increased among Swedish households and companies. The deregulation and increased indebtedness contributed towards the banking and financial crisis at the start of the 1990s. The fiscal policy was not tight enough to support the fixed exchange rate.

The crisis culminated in the autumn of 1992, when the Riksbank raised the interest rate to 500 per cent to defend the krona. This defence failed and the krona exchange rate was allowed to float.

Following the decision to allow the krona to float, work on developing a price stability target for monetary policy started. Early on, the Riksbank looked at inflation as a target and, among other things, studied New Zealand and Canada, which had both previously introduced inflation targeting. In January 1993, Bengt Dennis and the leaders of the Riksbank tabled a proposition that price stability should be the overall objective for monetary policy.

Over the period 1991–1994, Sweden was led by a right-wing coalition with Carl Bildt as prime minister. Bengt Dennis stood down as Governor of the Riksbank at the end of 1993 and was succeeded by Urban Bäckström.