Kerstin af Jochnick: Unusual measures in unusual times – experiences with the Riksbank’s unconventional monetary policy Speech by Ms Kerstin af Jochnick, First Deputy Governor of the Sveriges Riksbank, to SACO (Swedish Confederation of Professional Associations), Stockholm, 29 January 2016. *  *  *  Accompanying charts can be found at the end of the speech. I would like to thank Carl-Johan Belfrage, Hanna Köhler and Cecilia Roos-Isaksson for helping me with this speech. The start of a new year – particularly after such an eventful year as 2015 – can be a good time to look back and try to learn a few lessons from the past year’s experiences. I will therefore focus today on the reasons for the new monetary policy ground broken by the Riksbank in 2015. This includes our introduction of a negative repo rate and our initiation of government bond purchases as a complement to repo rate cuts to further boost demand in the economy and increase inflation. The inflation target is worth defending. This is why we have taken to unusual measures under unusual circumstances and these measures seem to have contributed towards good growth and a rising inflation trend. At the same time, there is reason to remember that the low level of interest rates is leading housing prices and mortgages to develop in a dangerous direction. I also intend to present a few preliminary reflections on the recently published assessment of the Riksbank’s monetary policy. Why is the inflation target so important?
The risk otherwise is that we will create new problems that may lead to low growth further on and new difficulties for monetary policy to reach the inflation target. I am concerned about Sweden’s position as one of a handful of countries in Europe that has not succeeded in getting a functioning macroprudential policy into place. With such a large financial system and the obvious major vulnerabilities present in the Swedish economy, our focus should be on urgently adopting measures. Valuable evaluation of monetary policy We thus have an unusual time behind us that has required unusual measures over the past year. Under such circumstances, it is natural to wonder, for example, how well the inflation target is functioning and which areas monetary policy should be responsible for. It therefore seems appropriate that the Riksdag Committee on Finance has just published its latest assessment of monetary policy.6 First and foremost, I would like to say that it has been a privilege to have my work reviewed and assessed by people with such impressive academic and practical credentials in the area of monetary policy as those possessed by Messrs. Goodfriend and King. Assessments are a key ingredient in every kind of work to improve operations and this assessment contains many reasonable opinions and suggestions for discussion and further work. We will do this over the spring, before submitting our consultation response in April.