Deputy Governor Karolina Ekholm Perspectives on monetary policy and the inflation target Riksdag Committee on Finance 18 September 2012.

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Presentation transcript:

Deputy Governor Karolina Ekholm Perspectives on monetary policy and the inflation target Riksdag Committee on Finance 18 September 2012

Making monetary policy decisions The starting point is the forecast for factors we cannot influence Which repo-rate path provides the best target fulfilment in terms of inflation and resource utilisation? Are there other factors arguing against the repo-rate path?

Why lower repo rate/repo-rate path? The starting point is the forecast for factors we cannot influence Policy rates abroad Which repo-rate path provides the best target fulfilment in terms of inflation and resource utilisation? Lower repo-rate path even without a different forecast for policy rates abroad Are there other factors arguing against the repo-rate path? Doubtful, and if so clarification of how this affects the decision is necessary

Policy rates abroad

Forecast for policy rates abroad July 2011 (yellow curve) Per cent, forward rates from 22 June Sources: National sources, Reuters EcoWin and the Riksbank

Forecast for policy rates abroad September 2012 (yellow curve) Per cent, forward rates from 31 August Sources: National sources, Reuters EcoWin and the Riksbank

Target fulfilment in terms of inflation and resource utilisation

Monetary policy alternatives, Sept 2012 Foreign interest rates according to the main scenario. Sustainable unemployment 6.5% Repo rate CPIF Unemployment Main scenarioLower repo rateHigher repo rate Sources: Statistics Sweden and the Riksbank

Monetary policy alternatives, July 2012 Foreign interest rates according to the main scenario. Sustainable unemployment 6.5% Repo rate CPIF Unemployment Main scenarioLower repo rateHigher repo rate Sources: Statistics Sweden and the Riksbank

Monetary policy alternatives, April 2012 Foreign interest rates according to the main scenario. Sustainable unemployment 6.5% Repo rate CPIF Unemployment Main scenarioLower repo rateHigher repo rate Sources: Statistics Sweden and the Riksbank

Other factors?

Risks on the credit and housing markets should be taken into account if… The credit and housing markets constitute a problem,… …no one else is doing anything... …and it is made clear how the repo rate is used for this purpose and how it is weighed against the costs in terms of poorer target fulfilment for inflation and unemployment

Have not been taken into account since autumn 2010 because… The credit and housing markets have showed a more stable development In principle lower growth in household credits since 2006 and stagnating housing prices since the end of 2010

Prices of single-family dwellings and tenant-owned apartments Index, January 2008 = 100 Source: Mäklarstatistik and Valueguard Note. All indexes are for Sweden. Valueguard is a hedonic price index. Mäklarstatistik (tenant-owned apartments) is an index of prices per square metre and Mäklarstatistik (single-family dwelling) is an index of the C/I ratio.

Have not been taken into account since autumn 2010 because… Others have done something Finansinspektionens mortgage cap 2010 It is unclear what is to be attained and how it is to be assessed