deputy governor karolina ekholm perspectives on monetary policy and the inflation target riksdag...
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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
0
1
2
3
4
0
1
2
3
4
11 12 13 14
Forward rates, TCW
Policy rate TCW, Riksbank’s forecast
Forward rates, Sweden
Repo rate, Riksbank’s forecast
Forecast for policy rates abroad September 2012 (yellow curve)Per cent, forward rates from 31 August
Sources: National sources, Reuters EcoWin and the Riksbank
0
1
2
3
4
0
1
2
3
4
12 13 14 15
Forward rates, TCW
Policy rate TCW, Riksbank’s forecast
Forward rates, Sweden
Repo rate, Riksbank’s forecast
Target fulfilment in
terms of inflation and
resource utilisation
Monetary policy alternatives, Sept 2012Foreign 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
0
1
2
3
4
0
1
2
3
4
10 11 12 13 14 150
1
2
3
0
1
2
3
10 11 12 13 14 15
6
7
8
9
6
7
8
9
10 11 12 13 14 15
Monetary policy alternatives, July 2012Foreign interest rates according to the main scenario. Sustainable unemployment 6.5%
Repo rate
CPIF
Unemployment
Main scenarioLower repo rateHigher repo rate
0
1
2
3
4
0
1
2
3
4
10 11 12 13 14 150
1
2
3
0
1
2
3
10 11 12 13 14 15
6
7
8
9
6
7
8
9
10 11 12 13 14 15
Sources: Statistics Sweden and the Riksbank
Monetary policy alternatives, April 2012Foreign interest rates according to the main scenario. Sustainable unemployment 6.5%
0
1
2
3
4
0
1
2
3
4
10 11 12 13 14 15
6
7
8
9
6
7
8
9
10 11 12 13 14 15
Repo rate
CPIF
Unemployment
Main scenarioLower repo rateHigher repo rate
0
1
2
3
0
1
2
3
10 11 12 13 14 15
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 apartmentsIndex, 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.
70
80
90
100
110
120
130
70
80
90
100
110
120
130
06 07 08 09 10 11 12
Valueguard (single-family house)
Mäklarstatistik (single-family house)
Valueguard (tenant-owned apartment)
Mäklarstatistik (tenant-owned apartment)
Have not been taken into account since autumn 2010 because… Others have done something
Finansinspektionen’s mortgage cap 2010
It is unclear what is to be attained and how it is to be assessed