Introduction on monetary policy The Riksdag Committee on Finance 8 November 1 Governor Stefan Ingves
Today s presentation Developments and monetary policy over the last 1 months Weaker growth prospects and low inflationary pressures Monetary policy increasingly expansionary Current monetary policy Ongoing low repo rate stimulating the economy Inflation rising towards the target
Monetary policy increasingly expansionary over the last 1 months Repo rate 1 1 6 7 8 9 1 11 1 Note. Per cent. Daily data Source: The Riksbank
Development marked by the debt crisis in Europe Government bonds in Sweden and in countries in the euro area 8 7 6 Spain Italy Germany Sweden 9 8 7 6 1 8 9 1 11 1 1 Note. 1 years to maturity, per cent. Source: Reuters EcoWin
Major challenges in the euro area Weak competitiveness Public finance problems Problems in European banks Political decisions still to be taken At the EU level At the national level
The slowdown in the euro area is affecting the Swedish economy GDP 11 1 USA Euro area Sweden 11 1 9 9 8 8 7 7 6 9 97 99 1 7 9 11 6 Note. Index, 7 Q = 1. Sources: Bureau of Economic Analysis, Eurostat and Statistics Sweden
Decline in Swedish exports Total exports 1 1 1 1 - - -1-1 -1-1 - 6 8 1 1 - Note. Annual percentage change, calendar-adjusted data. Sources: Statistics Sweden and the Riksbank
Companies and households less confident about the future Economic Tendency Indicator of the National Institute of Economic Research 1 1 11 11 1 1 9 9 8 7 The Economic Tendency Indicator Mean +/- one standard deviation 6 8 1 1 8 7 Note. Index, mean = 1, standard deviation = 1 Source: National Institute of Economic Research
Nevertheless, the Swedish economy has shown relatively strong resilience GDP growth 1 8 USA Euro area 1 8 6 Sweden 6 - - - - -6-6 -8 7 8 9 1 11 1-8 Note. Annual percentage change. Sources: Bureau of Economic Analysis, Eurostat and Statistics Sweden
Resilient Swedish labour market Individuals (thousands) and percentage of labour force, 1-7 age group Labour force (left) Employed (left) Unemployment (right) 1 1 8 8 6 6 1 7 9 11 Note. Seasonally-adjusted data, three-month moving average. Sources: Statistics Sweden and the Riksbank
Stronger krona has reduced cost pressures Trade-weighted exchange rate, nominal TCW 16 16 1 1 1 1 1 1 8 8 6 8 8 9 9 1 6 Note. Monthly data, Index 18 November 199 = 1. Source: The Riksbank
Note. Annual percentage change. The CPIF is the CPI with a fixed mortgage rate. Source: Statistics Sweden Declining rate of inflation Inflation measured in terms of the CPI and the CPIF CPIF CPI 1 1-1 -1-6 8 1 1 -
Note. Per cent, monthly averages. Average mortgage rates for Sources: Statistics Sweden and the Riksbank households and bank rates for companies (new agreements) and the repo rate. Low repo rate stimulating the economy Repo rate, mortgage rates for households and bank interest rates for companies 7 7 Average bank interest rate for companies Average mortgage rate 6 Repo rate 6 1 1 6 7 8 9 1 11 1
Risks must be taken into account High indebtedness makes the economy vulnerable can have devastating consequences Shrinking economy Accelerating unemployment Problems attaining the inflation target Few other measures in place today The risks of high indebtedness need to be taken into account in monetary policy
Lending to households has increased more slowly... Lending to companies and households 1 Companies Households 1 1 1 - - -1 99 1 7 9 11-1 Note. Annual percentage change. Source: Statistics Sweden
but household debt must be carefully monitored Household wealth and debt, percentage of disposable income 6 Households' real and financial wealth (excluding collective insurance saving) Households' liquid wealth Households' total debts 6 1 1 7 7 78 8 86 9 9 98 6 1 Note. Households real and financial wealth refers to the Riksbank s estimate of the households financial assets and housing assets. Liquid wealth here refers mainly to cash, bank deposits, bonds and shares. Sources: Statistics Sweden and the Riksbank
Current monetary policy Low repo rate stimulating the Swedish economy
Some improvement on the financial markets Stock exchange movements 18 16 Emerging markets (MSCI) USA (S&P ) Euro area (EuroStoxx) Sweden (OMXS) 18 16 1 1 1 1 1 1 8 8 6 6 7 8 9 1 11 1 Note. Index, 1 January 6 = 1. Source: Reuters Ecowin
Slow recovery in the euro area GDP growth in different parts of the world 1 1 9 9 6 6 - -6 BRIC The world USA Euro area 6 8 1 1 1 - -6 Note. Annual percentage change. Sources: Bureau of Economic Analysis, Eurostat, IMF and the Riksbank
Weak demand for Swedish exports New export orders 6 8 7 6 - - -6 6 7 8 9 1 11 1 Note. Net figures. Source: National Institute of Economic Research
Note. Index =1, seasonally-adjusted. Points show IMF forecast from October 1. Sources: CPB Netherlands Bureau for Economic Policy Analysis and the IMF but no dramatic fall in world trade World trade index 18 18 World trade index 17 IMF forecasts for 1 and 1 17 16 16 1 1 1 1 1 1 1 6 7 8 9 1 11 1 1 1
Note. Quarterly changes calculated as annual rate, seasonally-adjusted data Sources: Statistics Sweden and the Riksbank Swedish economy slowing down GDP growth 1 1 8 8 - - -8-8 -1 September October -1-16 6 8 1 1 1-16
Slower recovery on the labour market Unemployment 9 9 September October 8 8 7 7 6 6 6 8 1 1 1 Note. Percentage of labour force, 1-7, quarterly values, seasonally-adjusted data. Sources: Statistics Sweden and the Riksbank
Signs of poorer matching on the labour market Total of registered unemployed in vulnerable groups and total other registered unemployed Vulnerable groups Other groups 1 1 1 1 6 8 1 1 Note. Trend-adjusted values. No. of remaining job-seekers at end of month. Source: Public Employment Office
Note. Annual percentage change. The CPIF is the CPI with a fixed mortgage rate. Sources: Statistics Sweden and the Riksbank Low but rising inflation Inflation measured in terms of the CPI and CPIF CPIF CPI 1 1-1 -1-6 8 1 1 1 -
Repo rate still low to attain the inflation target Repo rate September October 1 1 6 8 1 1 1 Note. Per cent, quarterly mean values. Source: The Riksbank