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Introduction on
monetary policy
Riksdag Committee on
Finance
3 March 2011
Governor Stefan Ingves
Today’s presentation

Where have we come from?

Where are we now?

Where are we going?
1. Where have we come from?
The calm before the storm
10-year government bond yields in Sweden, the euro area and the USA
18
18
Euro area
16
16
Sweden
14
14
USA
12
12
10
10
8
8
6
6
4
4
2
2
0
0
70
75
80
85
90
95
Note. Interest rates in per cent.
00
Sources: The ECB and Reuters Ecowin
05
10
1. Where have we come from?
Financial crisis – GDP falling dramatically
Growth in Sweden and abroad
6
6
4
4
2
2
0
0
-2
-2
-4
-4
Sweden
The world
-6
-6
80
85
90
95
00
Note. Annual percentage change.
05
10
Sources: The IMF, Statistics Sweden and the Riksbank
1. Where have we come from?
Policy rates cut substantially
Policy rates in Sweden, the euro area and the USA
8
8
Sweden
7
7
Euro area
6
6
USA
5
5
4
4
3
3
2
2
1
1
0
0
00
01
02
03
04
05
06
07
08
Note. Interest rates in per cent
09
10
11
Sources: The ECB, the Federal Reserve and the Riksbank
1. Where have we come from?
The financial crisis in Sweden – what
happened?

Heavy fall in world trade
Swedish exports fell substantially
Largely a decline in demand from abroad

Differences from 1990s crisis






1990s: ”Rest of the world fairly OK, but Sweden not OK”
Now: ”Rest of the world not OK, but Sweden was OK”
1990s: Solvency crisis and very large loan losses
Now: Liquidity crisis and limited loan losses with small
percentage in Sweden
2. Where are we now?
Strong recovery – exports gone from braking to
accelerating the economy
World trade volumes, export market
and Swedish exports
180
180
World trade
Export markets
160
160
Total Swedish exports
140
140
120
120
100
100
80
80
60
60
40
40
94
96
98
00
02
04
06
08
10
Index, 2000 = 100, seasonally-adjusted data
Sources: Netherlands Bureau of Economic Analysis, Statistics Sweden and the Riksbank
2. Where are we now?
Emerging economies small but growing share of
Swedish exports
Percentage of Sweden’s total exports of goods to different countries and regions
45
40
2000
35
2005
2010
30
25
20
15
10
5
0
Euro area
USA
UK
Danmark+Norway
BRIC
Note. Shares shown in per cent. However, they do not add up to 100 per cent, as not all countries are shown here.
Source: Statistics Sweden
2. Where are we now?
Swedish economy growing rapidly…
GDP growth 2010 in different countries and regions
10
10
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
USA
Euro area
UK
Denmark
Norway
(mainland
economy)
BRIC
countries
Sweden
Note. Annual percentage change. Outcome for whole year 2010 has not been received for a number of countries and
regions. In these cases forecasts are shown, based on the first three quarters.
Sources: National statistical authorities and Statistics Sweden
2. Where are we now?
Inflationary pressures rising
Commodity prices
300
300
Metals
Other agricultural products
250
250
Food
Crude oil
200
200
150
150
100
100
50
50
0
0
00
01
02
03
04
05
06
07
08
Note. Index 2005 = 100, USD
09
10
11
Sources: The Economist and Intercontinental Exchange
3. Where are we going?
Swedish GDP growth towards more normal levels
GDP growth in Sweden, the euro area and the USA
10
10
5
5
0
0
-5
-5
Sweden
Euro area
USA
-10
-10
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
Note. Annual percentage change, seasonally-adjusted data. Broken lines and columns represent the Riksbank’s forecasts.
Sources: Bureau of Economic Analysis, Eurostat, Statistics Sweden and the Riksbank
3. Where are we going?
Unemployment is continuing to fall…
Unemployment in Sweden
14
14
Unemployment, 16-64 years
12
12
Unemployment, 15-54 years
10
10
8
8
6
6
4
4
2
2
0
0
80
85
90
95
00
05
10
Note. Percentage of labour force, seasonally-adjusted. Data prior to 1993 is spliced by the Riksbank. Broken line represents
the Riksbank’s forecast, 15-74 years.
Sources: Statistics Sweden and the Riksbank
2. Where are we now?
Shortages increasing
Percentage of companies with a shortage of labour
70
70
Manufacturing industry
Construction industry
60
60
Retail trade
Private services industries
50
50
Business sector total
40
40
30
30
20
20
10
10
0
0
95
96
97
98
99
00 01 02 03 04 05 06 07
Note. Per cent, seasonally-adjusted data.
08
09
10
Source: National Institute of Economic Research
11
3. Where are we going?
Strong krona
Trade-weighted exchange rate, TCW
160
160
150
150
140
140
130
130
120
120
110
110
100
100
90
90
92
94
96
98
00
02
04
06
08
10
12
14
Note. Index, 18 November 1992 = 100. Outcomes are daily listings and forecasts refer to quarterly averages. Broken line
represents the Riksbank’s forecast.
Source: The Riksbank
3. Where are we going?
Inflation close to the target
CPI, CPIF and CPIF excluding energy
5
5
CPI
CPIF
CPIF excluding energy
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
Note. Annual percentage change. The CPIF is the CPI with a fixed mortgage rate. Broken lines represent the Riksbank’s forecasts.
Sources: Statistics Sweden and the Riksbank
3. Where are we going?
Continuing repo rate increases
The Riksbank’s repo rate forecast
7
7
90%
75%
50%
Outcome
Forecast
6
6
5
5
4
4
3
3
2
2
1
1
0
0
04
05
06
07
08
09
10
11
12
13
Note. Repo rate in per cent. Broken line represents the Riksbank’s forecast.
Source: The Riksbank
14