Svante Öberg: The Riksbank and the Swedish economy Speech by Mr Svante Öberg, Deputy Governor of the Sveriges Riksbank, at a meeting of SIMRA, the Swedish Society of Business Analysts, Stockholm, 5 October 2006. *  *  *  I would first like to thank you for the invitation to this lunch meeting. Today I intend to speak about monetary policy and wage formation. This is a very topical subject, particularly given that most of the collective wage agreements in the labour market are due to be renegotiated next year and that wage formation has such significance for developments in inflation and the stability of the Swedish economy. Wage formation has functioned much better over the past 10-15 years than it did during the 1970s and 1980s and it is essential that this good development can continue. I will divide my speech into five parts: First a section on how monetary policy is conducted, followed by a section containing a long-term perspective on economic developments, and then a section on how wage formation has changed, a section on the conditions for wage bargaining and finally I will conclude with a summary. Allow me to begin by describing how we work at the Riksbank. How monetary policy is conducted In Sweden we now conduct monetary and exchange rate policy based on inflation targeting and a floating exchange rate. This is different from the decades up to autumn 1992 when we had a fixed exchange rate as target.
It is, of course, two distinct processes – one for the UK to recognise the EU as equivalent to the UK, and one for vice versa. The UK has granted equivalence to the EU in some areas, but the EU has not done likewise to the UK. In a few areas – involving central clearing and settlement – there has been agreement by the EU to extend temporary equivalence to the UK, recognising, I think, the clear risks to financial stability that would have arisen had this not been done at the outset. It would be reasonable to think that a common framework of global standards combined with the common basis of the rules – since the UK transposed EU rules from the outset – would be enough to base equivalence on global standards. Less than this was enough when Canada, the US, Australia, Hong Kong and Brazil were all deemed equivalent. Continuing with the example of central clearing, the EU has recently made the US SEC equivalent for CCPs, subject to certain conditions. These conditions are already met by UK CCPs as they are a legal requirement in the onshored legislation, but equivalence beyond the temporary extension remains uncertain. The EU has argued it must better understand how the UK intends to amend or alter the rules going forwards. This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself.