Increased risk of new financial crisis. Increased wealth gaps. Influenced housing prices. A Swedish krona on fall. In an interview with SVT on Friday, January 17, the professor of economics at Lund University, Lars Jonung, made harsh criticism of the long period of negative interest rates.
But according to Cecilia Skingsley, Jonung has misunderstood the Riksbank's role. The Riksbank has a single assignment. That is, with monetary policy, ensure that inflation is low and stable and is close to two percent.
- We are responsible for stabilizing inflation and our policy has returned inflation to the target where it has now been for a number of years and inflation expectations have risen, she says.
According to Skingsley, the small Swedish open economy makes Sweden dependent on the outside world's low real interest rates. An aging population, poorer growth prospects and poorer productivity growth internationally have meant that real interest rates are low, whether they are low or high. As a result, low interest rates have also been required to maintain the inflation target, according to Cecilia Skingsley.
Gaps are increasing
According to Skingsley, Jonung is right when he points out that wealth gaps have increased due to low interest rates as the prices of shares and housing are rising.
- The policy entails rising asset prices and those who already have money benefit from it, she says.
At the same time, according to Skingsley, the large distribution gap is between those who have jobs and those who do not. And there, the Riksbank's interest rate policy has had positive effects as it has helped to maintain Swedish employment, points out the Deputy Governor.
- Monetary policy has distribution policy effects. But counteracting it by keeping high interest rates would have been a bad alternative. Tax policy and grant design give more precise effects if one wants to change the economic conditions between different social groups. But it is ultimately a matter for voters and politicians to decide, says Cecilia Skingsley.