Monthly Archives: March 2014

The Riksbank’s account of monetary policy to the Riksdag hides that its own calculations support the minority

New Ekonomistas post (in Swedish). This is an English translation.

The Riksbank has recently delivered an account of monetary policy in 2013 to the Riksdag for the Finance Committee’s annual assessment of the monetary policy. This account is clearly a biased account from the majority of the Riksbank’s executive board, since it hides that the Riksbank’s own calculations support the minority.  Continue reading

Ingves about low inflation and increased debt burden: “The inflation rate is not a particularly significant issue”

New Ekonomistas post (in English). This is an English translation.

That low inflation and deflation increases the debt burden is well known to many. For instance, under the heading ”The spectre of eurozone deflation,” Martin Wolf recently wrote in the Financial Times: ”While falling prices would improve competitiveness, they would raise the real burden of private and public debt. This might well create another round of financial stresses.” Lower inflation than expected leads to higher real debt than anticipated and planned, and thereby increases the debt burden. In Sweden, a zero inflation rate during the last two years has led to real debt increasing in two years by SEK 40 000 for each borrowed SEK million, compared to if inflation had equaled the inflation target of 2 percent. But is this known and understood in the Riksbank? At the press conference after the publication of the Financial Stability Report on November 28, Governor Ingves was asked, if the low inflation rate made household indebtedness worse. What did he reply? Continue reading

Misleading op-ed from Riksbank Deputy Governors Jansson and Skingsley

New Ekonomistas post (in Swedish). Here is an English translation.

In an op-ed in the Swedish newspaper Dagens Nyheter on March 16, ”Felsyn att Riksbanken bara fokuserar på bostadsbubbla” (“Error in judgment that the Riksbank only focuses on a housing bubble,” in Swedish, my translation), Deputy Governors Per Jansson and Cecilia Skingsley repeat the statement that the Riksbank is not deviating from its mandate. They say this in spite of the fact that Riksbank’s “leaning against the wind” policy has led to inflation far below the target and unemployment far above a reasonable sustainable rate. They maintain that the higher policy rate, by checking increases in housing prices and household debt, would reduce the long-run risk of a future crisis and an accompanying worse macroeconomic outcome. But, strangely enough, they are quiet about the Riksbank’s own estimate that the policy rate has no long-run effect on household debt. Thereby their reasoning does not stand up to scrutiny, and the conclusion that the Riksbank is deviating from its mandate stands.  Continue reading

Governor Ingves responds regarding the policy-rate effect on household debt

New Ekonomistas post (in Swedish). Here is an English translation.

According to the Riksbank’s own estimate, the policy-rate effect on household debt is so small that one can maintain that it is neither economically nor statistically significant. What did Governor Stefan Ingves answer to a question about this at a hearing in the Riksdag’s Finance Committee?  Continue reading

The Riksbank’s target achievement does not look better with CPIF and CPIX inflation, or with HCIP inflation

Updated on May 3, 2015.
English translation of Ekonomistas post (in Swedish).

The Riksbank’s inflation target is 2 percent for CPI inflation. Average inflation since 1995, when the inflation target started to apply, is only 1.3 percent. Target achievement is thus bad, especially when one compares with other central banks that have had inflation target as long as the Riksbank. The Riksbank has usually defended itself by noting that target achievement is better for other measures of inflation, namely inflation measured by the price indices CPIF and previously CPIX. But a closer look shows that target achievement does not look better with CPIF and CPIX inflation. Neither does it look better with HICP inflation. Continue reading