Ingves and Ohlsson at the Riksdag Committee on Finance: A combination of measures most effective to support the economy
News, Speeches Governor Stefan Ingves and Deputy Governor Henry Ohlsson today took part in the year's second hearing on monetary policy at the Riksdag Committee on Finance. They commented among other things on the measures taken by the Riksbank to alleviate the economic consequences of the coronavirus pandemic.
The economy has begun to recover after having fallen sharply in the spring. “But we are a long way off firm ground. The recovery can become both protracted and volatile, and will be very much affected by the spread of infection going forward,” Stefan Ingves pointed out in his introduction at the hearing.
He showed how the combination of measures implemented by the Riksbank since the beginning of the crisis – including asset purchases and offers of liquidity – had been effective in calming the financial markets and helping to ensure that interest rates faced by households and companies remained low during the crisis. In the current uncertain situation it is important that this remains the case, as low interest rates create conditions for recovery and for inflation. “Without the measures taken by the Riksbank, the crisis would probably have been even worse for households and companies, and not least unemployment could also have been higher,” said Mr Ingves.
But Mr Ingves emphasised that it is important, when managing such a serious shock to the global economy, to make use of the strength of total economic policy and he pointed out that fiscal policy is better able than monetary policy to specifically target support to the sectors affected.
Henry Ohlsson also highlighted the effects of the pandemic on the economy in his introduction. As a result of the crisis, unemployment has risen rapidly both in Sweden and abroad. “We are now seeing rapid improvements in economic activity. But history has taught us that the improvement in the labour market will probably take longer,” said Mr Ohlsson. “There are now good opportunities to raise the productivity of the labour force through education and other measures to increase skills. Such measures would have long-term positive effects on both employment and inflation,” said Mr Ohlsson.