Riksbank Governor Stefan Ingves Introduction on monetary policy Riksdag Committee on Finance 23 February 2012.

Riksbank Governor Stefan Ingves

Introduction on monetary policy

Riksdag Committee on Finance

23 February 2012

Today’s presentation

BackgroundRecent developments and monetary policy

Current monetary policy

Strong recovery from financial crisis in 2010 and 2011GDP growth in Sweden and the world

Background

Note. Annual percentage change, calendar-adjusted data. Broken column and line refer to the Riksbank’s forecast in February 2012.

Sources: The IMF, Statistics Sweden and the Riksbank

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Sweden

The world

Large differences between regionsGDP growth in 2010 and2011 in different regions and countries

Background

Sources: Bureau of Economic Analysis, Eurostat, IMF, Statistics Sweden and the Riksbank

Note. Annual percentage change. 2011 refers to the Riksbank’s forecast in February 2012

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Euro area USA BRIC Sweden

2010 2011

Poorer outlook in second half of 2011

We have for some time been expecting lower growth after 2010 and 2011

The question was how large the decline would be

Clear signs in autumn 2011 – the decline will be much greater than expected

Background

Debt crisis in Europe marked the autumn…Government bond yields in Sweden and countries in the euro area

Background

Note. 10-year maturity, per cent Source: Reuters EcoWin

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Sweden

Germany

Ireland

Italy

Spain

Portugal

Greece

…which affected SwedenNational Institute of Economic Research’s economic tendency survey

Background

Source: National Institute of Economic ResearchNote. Index, average = 100, standardavvikelse = 10

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The Economic Tendency Indicator

Mean

Pause in policy rate increases followed by cut in DecemberPolicy rates

Background

Source: Reuters EcoWinNote. Per cent

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USA

Euro area

Sweden

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Weaker export at the end of last year…Goods exports

Current monetary policy – present status

Note. Index, 2005 = 100, fixed prices, seasonally-adjusted dataThree-month moving average. Fixed prices calculated by the Riksbank.

Sources: Statistics Sweden and the Riksbank

…but more positive on financial markets recentlyStock markets

Note. Index, 3 January 2006 = 100. Source: Reuters EcoWin

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Sweden (OMXS)

Euro area (Euro Stoxx)

USA (S&P 500)

Current monetary policy – present status

Good global growth, but weak in the euro areaGDP growth in different parts of the world

Note. Annual percentage change. Sources: Bureau of Economic Analysis, Eurostat, the IMF and the Riksbank

Current monetary policy – the forecast

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Euro area

USA

BRIC

The world

Swedish exports slow down, despite new marketsPercentage of Sweden’s total goods exports

Source: Statistics Sweden

Note. Per cent. Figures for 2011 refer to average up to November. Percentages do not total 100 per cent as not all countries are reported.


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Euro area USA UK Denmark+Norway BRIC

2000

2005

2011

Poorer future prospects dampen willingness to consumeThe confidence indicator and household consumption

Note. Net figures (confidence indicator) and annual percentage change respectively (household consumption)


Sources: National Institute of Economic Research, Statistics Sweden and the Riksbank

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Household consumption (right scale)

Confidence indicator

Weak growth this year – recovery takes timeGDP


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Note. Annual percentage change, calendar-adjusted data


Labour market will deteriorate before improvingUnemployment


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Note. Per cent of labour force, seasonally-adjusted data

Balanced wage increasesWages according to short-term wage statistics

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Note. Annual percentage change. For 2011 the outcomes refer to estimated values on the basis of preliminary outcomes and historical revisions.


Sources: The National Mediation Office and the Riksbank

Stronger kronaCurrency-weighted exchange rate

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Note. TCW index, 18 November 1992 = 100 Source: The Riksbank

Continuing low inflationary pressureInflation measured according to the CPI and the CPIF

Note. Annual percentage change Sources: Statistics Sweden and the Riksbank


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CPIF

CPI

Low repo rate to attain inflation targetRepo rate

Note. Per cent, quarterly averages

Source: The Riksbank

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Current monetary policy – the repo rate

”It is very difficult to make predictions, especially about the future.”

Niels Bohr

Current monetary policy – alternative outcome

Consequences of alternative outcomes, examplesRepo rate

Current monetary policy – alternative outcome

Per cent, quarterly averages Source: The Riksbank

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Main scenario

Stronger krona and weakeroutcome abroad

Weaker krona and strongeroutcome abroad

A forecast, not a promiseRepo rate

Note. Per cent, quarterly averages Source: The Riksbank

Current monetary policy – summary

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90%75%50%OutcomeForecast

Many interest rates important in the economy Repo rate, mortgage rates to households and bank lending rates to companies

Current monetary policy – repo rate and other interest rates

Note. Per cent. Rates to households and companies refer to new agreements. Variable mortgage rate refers to fixed terms of up to 3 months. Long fixed mortgage rate refers to fixed periods of between 1 and 5 years.

Sources: Statistics Sweden and the

Riksbank

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Repo rate

Variable mortgage rate

Long fixed mortgage rate

Average bank lending rate to companies

Changes in the repo rate affect interest rates in generalRepo rate and average of mortgage rates to households and bank lending rates to companies

Current monetary policy – repo rate and other interest rates


Note. Per cent. In the blue line, households’ average rate is weighted with the percentage of loans to households, and companies’ average interest rate is weighted with the percentage of loans to companies. Rates refer to new agreements.

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Repo rate

Average of mortgage rate to households and bank lending rate to companies

Riksbank Governor Stefan Ingves Introduction on monetary policy Riksdag Committee on Finance 23 February 2012.

Documents

riksbank slide

forecast slide

cent slide

expected background

riksbank note

reuters ecowin slide

forecast sources

policy rates background