introduction on monetary policy riksdag committee on finance 18 september 2012
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Introduction on monetary policy Riksdag Committee on Finance 18 September 2012. Governor Stefan Ingves. Perspectives on monetary policy. Sweden’s economy has coped well throughout the financial and debt crises The inflation target has served as a foundation for monetary policy - PowerPoint PPT PresentationTRANSCRIPT
Governor Stefan Ingves
Introduction on monetary policyRiksdag Committee on
Finance18 September 2012
Perspectives on monetary policy
Sweden’s economy has coped well throughout the financial and debt crises
The inflation target has served as a foundation for monetary policy
A lowered interest rate counteracts low inflation and supports economic activity
Sweden has coped well in a turbulent international
situation
The financial crisis – dramatic fall in GDP, followed by strong recovery in SwedenGDP level
Sources: The OECD, Statistics Sweden and the Riksbank
Note. Index, 2007 Q4=100.
92
96
100
104
108
92
96
100
104
108
07 08 09 10 11 12
USAEuro areaSweden
From financial crisis to debt crisis in Europe Sovereign debts in various countries
Source: IMF
Note. Public gross debt as a percentage of GDPBroken lines represent the IMF’s forecast.
0
20
40
60
80
100
120
140
160
180
0
20
40
60
80
100
120
140
160
180
90 92 94 96 98 00 02 04 06 08 10 12 14
GreklandIrlandItalienPortugalSpanienSverige
Improvements from the 1990s in Sweden
Strong growth in productivity
Reform of fiscal and monetary policyStable public financesLow and stable inflation
Sweden’s economy is holding up well
Strong GDP growthGDP growth 2010 and 2011 in various regions and countries
Sources: Bureau of Economic Analysis, Eurostat, IMF and Statistics Sweden
Note. Annual percentage change.
0
1
2
3
4
5
6
7
8
9
10
0
1
2
3
4
5
6
7
8
9
10
Euro area USA Sweden BRIC
2010
2011
Large current account surplus in SwedenCurrent account balance 2011
Source: IMFNote. Percentage of GDP
-10
-8
-6
-4
-2
0
2
4
6
8
-10
-8
-6
-4
-2
0
2
4
6
8
Resilient Swedish labour marketUnemployment, per cent
Sources: Bureau of Labor Statistics, Eurostat and Statistics Sweden
0
2
4
6
8
10
12
0
2
4
6
8
10
12
00 01 02 03 04 05 06 07 08 09 10 11 12
Sweden
Euro area
USA
Low loan losses in Swedish banks
Note. Summed up over four quarters, SEK billion, fixed prices, March 2012. Broken lines refer to the Riksbank’s forecast in Financial Stability Report 2012:1.
Sources: Bank reports and the Riksbank
-20
0
20
40
60
80
100
120
-20
0
20
40
60
80
100
120
90 92 94 96 98 00 02 04 06 08 10 12 14
Profit before loan losses
Loan losses
Recent appreciation of the kronaTrade-weighted exchange rate, TCW index
Note. Index, 18 Nov 1992 = 100 Source: The Riksbank
60
70
80
90
100
110
120
130
140
150
160
60
70
80
90
100
110
120
130
140
150
160
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Perspectives on monetary policy and the inflation target
Lower and more stable inflationInflation in Sweden 1970-2012
Note. Annual percentage change of the CPI Source: Statistics Sweden
-2
0
2
4
6
8
10
12
14
16
-2
0
2
4
6
8
10
12
14
16
70 75 80 85 90 95 00 05 10
CPI
Average 1995-2011
The inflation target and inflation in figures
January 1993: Inflation should be 2 per cent as of 1995, measured in terms of the CPI
CPI inflation 1995-2011: 1.5 per cent*
CPIF inflation 1995-2011: 1.8 per cent*
Over half of the deviation from 2 per cent in CPI inflation can be explained by a falling interest rate trend
*Measured using ’real-time data’, that is without reference to the change in calculation method introduced in 2005
Confidence in the inflation targetActual and expected inflation, per cent
Sources: Prospera Research and Statistics Sweden
Note. Inflation measured by CPI. Expectations refer to money market agents.
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
94 96 98 00 02 04 06 08 10 12 14 16
Inflation expectationsCPI
Unemployment reflects structural problemsUnemployment and output gap, per cent
Note. Output gap according to the production function approach. Sources: Statistics Sweden and the Riksbank
-8
-6
-4
-2
0
2
4
6
8
10
12
-8
-6
-4
-2
0
2
4
6
8
10
12
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Output gap
Unemployment
Unempoyment, average
The financial crisis a reminder of the risks on the housing and credit marketsReal housing prices in various countries
Note. Index, 1996 Q1=100. Source: Reuters EcoWin
0
50
100
150
200
250
300
0
50
100
150
200
250
300
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Ireland
Spain
USA
The Riksbank has warned of the risks in the Swedish housing marketReal housing prices in various countries
Note. Index, 1996 Q1=100. Source: Reuters EcoWin
0
50
100
150
200
250
300
0
50
100
150
200
250
300
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Sweden
Ireland
Spain
USA
Germany
Household debt must be monitored carefullyHousehold debt and post-tax interest expenditure, per cent of disposable income
Note. Broken lines refer to the Riksbank’s forecast in Financial Stability Report 2012:1.
0
2
4
6
8
10
12
14
16
18
20
22
0
20
40
60
80
100
120
140
160
180
200
220
93 95 97 99 01 03 05 07 09 11 13 15Debt ratio (left scale) Interest ratio (right scale)
Sources: Statistics Sweden and the Riksbank
Risks must be taken into account Risks on the credit and housing markets must be
taken into account in monetary policy Other measures: macroprudential policy
instruments, amortisation requirements, increased housing supply…
But few of these are in place at present The principle of prudence has been
successful
Current monetary policy
A lowered interest rate counteracts low inflation and supports economic activity
Weak developments in euro areaGDP, annual percentage change
Sources: Bureau of Economic Analysis, Eurostat and the Riksbank
-6
-4
-2
0
2
4
6
-6
-4
-2
0
2
4
6
00 02 04 06 08 10 12 14
The world
USA
Euro area
Growth will slow down in the period aheadGDP, quarterly changes in per cent calculated as an annual rate, seasonally-adjusted data
Sources: Statistics Sweden and the Riksbank
-16
-12
-8
-4
0
4
8
12
-16
-12
-8
-4
0
4
8
12
07 09 11 13 15
JulySeptember
Stronger kronaCompetition-weighted nominal exchange rate
Note. TCW, Index, 18 Nov 1992 = 100 Source: The Riksbank
110
120
130
140
150
160
110
120
130
140
150
160
07 09 11 13 15
July
September
Labour market hindered by weak growthUnemployment
Note. Per cent of labour force, ages 15-74, quarterly data, seasonally-adjusted
Sources: Statistics Sweden and the Riksbank
5
6
7
8
9
5
6
7
8
9
07 09 11 13 15
July
September
Lower inflationary pressures
Weaker growth in the period ahead Positive development of productivity Stronger krona
Lower repo rate…
Note. Per cent, quarterly averages Source: The Riksbank
0
1
2
3
4
5
0
1
2
3
4
5
07 08 09 10 11 12 13 14 15
July
September
…counteracts excessively low inflationInflation measured in terms of the CPI and the CPIF
Note. Annual percentage change. The CPIF is the CPI with a fixed mortgage rate
Sources: Statistics Sweden and the Riksbank
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
07 09 11 13 15
CPIF
CPI
Household sector borrowing is increasing at a slower rateLending to households and companies
Note. Annual percentage change. Source: Statistics Sweden
-10
-5
0
5
10
15
20
-10
-5
0
5
10
15
20
99 01 03 05 07 09 11
Companies
Households
-1
0
1
2
3
4
5
6
7
-1
0
1
2
3
4
5
6
7
07 09 11 13 15
90%75%50%OutcomeForecast
A forecast, not a promiseThe repo rate
Note. Per cent, quarterly averages Source: The Riksbank
Sweden’s economy has coped well throughout the financial and debt crises
The inflation target has served as a foundation for monetary policy
A lowered interest rate counteracts low inflation and supports economic activity