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Sweden’s monetary policy counteroffensive in the virus crisis is being led from a house in Upplands Väsby. Riksbank Governor Stefan Ingves looks around and has all the technical aids he needs to manage work from home.
– It is a completely different world that periodically is quite demanding. You become a technical juggler, he tells DN via Skype.
In the turmoil of the pandemic, the Governor has opened a crisis toolbox that is new to the Swedish economy. From an international perspective, the measures are certainly not innovative. But in Sweden, the central bank had not previously purchased housing bonds, municipal bonds or corporate bonds in the way it is now.
The crisis measures for the spring months are as historic as the negative interest rate that the Riksbank abolished before the end of the year.
A few weeks ago the situation was critical.
– What we have tried to achieve is to avoid a general increase in the interest rate created by great uncertainty. Our impression is that it has worked so far. It’s calmed down a bit anyway.
The Riksbank Governor now handles work from home. Photograph taken in the kitchen of Stefan Ingve 2017.
Photo: Eva Tedesjö
For ten years, Stefan Ingves warned that growing indebtedness can almost trigger a crisis. Instead, it became a virus that toppled the world economy, and the Riksbank crisis program now allows new loans in amounts of over SEK 1 billion.
– After all, we go into this with extremely high household debt, we must not forget that. We will bring with us an even greater debt burden. But in the short term there is no other option, says Stefan Ingves.
Before the infection broke out Seriously, in Europe and economic policy was switched to crisis mode, the Riksbank Executive Board prepared for a completely different battle.
It is about the future of monetary policy. About the power itself over the Riksbank.
– It’s the old question that has been there since 1668, who controls the Riksbank? Stefan Ingves says.
The case refers to a new Riksbank Law. The fact that an update is needed is not really controversial. The current one, with 30 years on its neck, is a small antiquity considering everything that has happened since the law was written. Therefore, parliamentary parties presented a new proposal last fall. One point was to make clear what the Riksbank should do.
After processing the nearly 2,000 pages in the investigation, the Riksbank Executive Board has now submitted its formal benchmark response, and criticism is dogged.
– The sum of what you propose is to reduce the independence of the Riksbank as much as possible. It was called modernization, but when you look at the proposals, they go in the same direction, reducing the Riksbank’s ability to do what a central bank normally does, says Stefan Ingves.
Between banking economists and Other judges have not been a major bomb on parliament’s bill. It has been mentioned that many parties were expected. That the law seems to put more into what the Riksbank already does.
But Stefan Ingves strongly opposes the proposals.
For example, corporate lending is banned through banks launched by the Riksbank in the crown crisis, a type of measure that is conventional in Europe.
– The query does not answer the question at all: what is the problem to solve? Instead, they are involved in detailed regulation that somehow locks up the Riksbank.
Is it not reasonable to have rules, for example, on what securities the Riksbank can buy?
– What it is about is that in an uncertain world, with very large financial markets and global capital flows, it is very difficult to specify in advance exactly what is obtained and what cannot be done. In my view, it just can’t be done.
The limitations of the new law would reduce the Riksbank in a unique way, according to Stefan Ingves, who notes that monetary policy has changed the tools over time. The Riksbank should have access to all the instruments used by modern central banks, not just those on the table just before the virus crisis.
In their referral response, Riksbank governors also focus on the fact that all of the bank’s measures must be divided into two purposes: monetary policy and measures for financial stability. The idea is that different rules and decision thresholds apply when the Riksbank wants to achieve different objectives.
But that doesn’t work, says Stefan Ingves.
– A utopian technical approach has been created when conducting central bank operations.
A central bank should, like In the EU treaty it is wonderfully called “independent”.
Trying to influence decisions like President Donald Trump would not be feasible in the EU. Here, the principles are more clearly stated in print.
– Our conclusion is that much of this goes against EU legislation. Your impression is that there is another agenda that is not mentioned in the investigation and that ultimately is about limiting the Riksbank’s independence.
It is also concerned that, according to the Riksdag’s proposal, the Riksbank will have less capital than its own capital. It can financially weaken the bank and also make it dependent on contributions from Parliament and the government.
Would you politicize monetary policy?
– It is reasonable to suppose that this could be so, says Stefan Ingves.
Why is it so important that the Riksbank is independent?
– When the mandate periods are short, other institutions with a longer time perspective are also needed.
Read more: Ingves: “It is about reacting to a process that has never been so fast”
Read more: “The proposed Riksbank Law hinders rapid crisis management”
