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RIKSBANK

Riksbank unveils new board members

Sweden's central bank has appointed two new board members plucked from banking and academia to replace two outgoing members, one of whom was an outspoken critic of the Riksbank's commitment to the government's inflation goal.

Riksbank unveils new board members

Swedbank chief economist Cecilia Skingsley and Stockholm University economics professor Martin Flodén will join the team of six board members who set Sweden’s benchmark interest rate, or repo rate.

Skingsley as late as April said she thought the central bank should lower interest rates, citing “weak macroeconomic horizons”.

“I find it a bit difficult to understand why the board refrained from lowering the interest rate,” she said at the time in a video published on Swedbank’s website.

SEB Bank chief strategist Johan Javeus told the TT news agency that both Skingsley and Flodén were appropriate choices for the governing board, and underlined they were not dissimilar to their predecessors – Barbro Wickman-Parak and Lars E.O. Svensson.

Svensson has disagreed with bank governor Stefan Ingves over the management of the repo rate, stating in public that lowering it earlier on when the financial crisis hit Europe could have had an effect on employment rates in Sweden. The Riksbank is tasked, however, with maintaining the two-percent inflation rate set as a target by the government.

“One can assume that Flodén, with his academic background, could come to the same conclusions as Svensson,” Javeus said.

“Skingsley is closer to the market and is probably a very good communicator.”

The appointments were made by the bank’s delegate body – whose members are named by parliament to oversee affairs at the independent central bank. Its chairman, Johan Gernandt, and his deputy Sven-Erik Österberg said on Thursday they were “very pleased” with the appointments of Skingsley and Flodén.

“(They) both have a lot of experience in finance and macroeconomics, and their backgrounds complement the governing board’s other members.”

The Left Party, meanwhile, said it was time to discuss the closed-doors selection process. It is the only party, alongside the Sweden Democrats, that does not have a representative on the delegate board (Riksbankfullmäktige).

“This is Swedish version of the papal election; it has no place in a democratic society,” said the party’s financial spokeswoman Ulla Andersson in a text message to TT.

She said the candidates for the board should be questioned by parliament and relevant parliamentary committees before appointments were made.

“It is important to know how they view monetary policies, the labour market and their role. The process we have now is outdated.”

TT/The Local/at

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ECONOMY

Sweden’s Riksbank raises rates above zero for first time since 2014

Sweden's central bank has increased its key interest rate to 0.25 percent, marking the first time the rate has been above zero for nearly eight years.

Sweden's Riksbank raises rates above zero for first time since 2014

In a press release announcing the move, the bank said that it needed to take action to bring down the current high rate of inflation, which it predicts will average 5.5 percent in 2022, before sinking to 3.3 percent in 2023.

“Inflation has risen to the highest level since the 1990s and is going to stay high for a while. To prevent high inflation taking hold in price and wage developments, the directors have decided to raise interest rates from zero to 0.25 percent,” it said. 

The Riksbank, which is tasked by the government to keep inflation at around two percent, has been caught off-guard by the speed and duration of price rises.

Just a few months ago, in February, it said it expected inflation to be temporary, predicting there was no need to increase rates until 2024.

The last time the key inflation rate was above zero was in the autumn of 2014. 

In the press release, the bank warned that the rate would continue to increase further in the coming years. 

“The prognosis is that the interest rate will be increased in two to three further steps this year, and that it will reach a little under two percent at the end of the three-year prognosis period,” it said. 

According to the bank’s new future scenarios, its key interest rate will reach about 1.18 percent in a year, and 1.57 percent within two years. 

In a further tightening of Sweden’s monetary policy, the bank has also decided to reduce its bond purchases. 

“With this monetary policy we expect inflation rates to decline next year and from 2024 to be close to two percent,” the bank wrote. 

Annika Winsth, the chief economist of Nordea, one of Sweden’s largest banks, said the rate hike was “sensible”. 

“When you look at how inflation is right now and that the Riksbank needs to cool down the economy, it’s good that they’re taking action – the earlier the better. The risk if you wait is that you need to righten even more.” 

She said people in Sweden should be prepared for rates to rise even further. 

“You shouldn’t rule it out in the coming year. Then you’ll have a once percentage point increase which will go straight into fluctuating mortgage rates.” 

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