Slides, Ingves: Introduction on monetary policy

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Riksbank Governor Stefan IngvesIntroduction on monetary policy Riksdag Committee on Finance 23 February 2012

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Today’s presentation Background Recent developments and monetary policy Current monetary policy

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Strong recovery from financial crisis in 2010 and 2011 GDP growth in Sweden and the worldBackgroundNote. 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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Large differences between regions GDP growth in 2010 and2011 in different regions and countriesBackground Sources: Bureau of Economic Analysis, Eurostat, IMF, Statistics Sweden and the RiksbankNote. Annual percentage change. 2011 refers to the Riksbank’s forecast in February 2012

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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

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Debt crisis in Europe marked the autumn… Government bond yields in Sweden and countries in the euro areaBackgroundNote. 10-year maturity, per centSource: Reuters EcoWin

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…which affected Sweden National Institute of Economic Research’s economic tendency surveyBackgroundSource: National Institute of Economic ResearchNote. Index, average = 100, standardavvikelse = 10

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Pause in policy rate increases followed by cut in December Policy ratesBackgroundSource: Reuters EcoWinNote. Per cent

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Weaker export at the end of last year… Goods exportsCurrent monetary policy – present statusNote. Index, 2005 = 100, fixed prices, seasonally-adjusted data Three-month moving average. Fixed prices calculated by the Riksbank.Sources: Statistics Sweden and the Riksbank

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…but more positive on financial markets recently Stock marketsNote. Index, 3 January 2006 = 100. Source: Reuters EcoWinCurrent monetary policy – present status

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Good global growth, but weak in the euro area GDP growth in different parts of the worldNote. Annual percentage change.Sources: Bureau of Economic Analysis, Eurostat, the IMF and the RiksbankCurrent monetary policy – the forecast

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Swedish exports slow down, despite new markets Percentage of Sweden’s total goods exportsSource: 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. Current monetary policy – the forecast

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Poorer future prospects dampen willingness to consume The confidence indicator and household consumptionNote. Net figures (confidence indicator) and annual percentage change respectively (household consumption)Current monetary policy – the forecastSources: National Institute of Economic Research, Statistics Sweden and the Riksbank

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Weak growth this year – recovery takes time GDPSources: Statistics Sweden and the RiksbankNote. Annual percentage change, calendar-adjusted dataCurrent monetary policy – the forecast

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Labour market will deteriorate before improving UnemploymentSources: Statistics Sweden and the RiksbankCurrent monetary policy – the forecastNote. Per cent of labour force, seasonally-adjusted data

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Balanced wage increases Wages according to short-term wage statisticsNote. Annual percentage change. For 2011 the outcomes refer to estimated values on the basis of preliminary outcomes and historical revisions. Current monetary policy – the forecastSources: The National Mediation Office and the Riksbank

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Stronger krona Currency-weighted exchange rateCurrent monetary policy – the forecastNote. TCW index, 18 November 1992 = 100Source: The Riksbank

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Continuing low inflationary pressure Inflation measured according to the CPI and the CPIFNote. Annual percentage changeSources: Statistics Sweden and the RiksbankCurrent monetary policy – the forecast

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Low repo rate to attain inflation target Repo rateNote. Per cent, quarterly averages Source: The RiksbankCurrent monetary policy – the repo rate

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  ”It is very difficult to make predictions, especially about the future.” Niels Bohr Current monetary policy – alternative outcome

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Consequences of alternative outcomes, examples Repo rateCurrent monetary policy – alternative outcomePer cent, quarterly averagesSource: The Riksbank

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A forecast, not a promise Repo rateNote. Per cent, quarterly averagesSource: The RiksbankCurrent monetary policy – summary

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Many interest rates important in the economy Repo rate, mortgage rates to households and bank lending rates to companiesCurrent monetary policy – repo rate and other interest ratesNote. 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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Changes in the repo rate affect interest rates in general Repo rate and average of mortgage rates to households and bank lending rates to companiesCurrent monetary policy – repo rate and other interest ratesSources: Statistics Sweden and the RiksbankNote. 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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Last Updated: 8th March 2018

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