Swedish economic growth remains healthy but there are a number of factors that need to be taken into consideration ahead of the central bank’s next meeting, said Riksbank deputy governor Kerstin af Jochnick on Friday. These include concerns over Italy, the escalating trade conflict between the US and China, and the turbulence in Turkey.
Af Jochnick commented that the preliminary estimate of Swedish GDP growth for the second quarter was higher than expected, economic activity remains elevated and the labour market is strong, but underlying inflation remains low.
Sweden’s Riksbank will celebrate its 350th anniversary in May this year. Writing in Dagens Industri (DI) today, Carl B Hamilton, a deputy member of the General Council of the Riksbank and Liberal MP, says that the independence of the central bank must be taken seriously. A governor should never be appointed directly from a senior political position in the government. “The government and the Riksbank are two separate, and partly competing, power centres in the country,” he writes. Appointing a political figure from the government reduces diversity and leads to an undesirable concentration of power.
Carl B Hamilton is concerned about the lack of support for the Riksbank’s independence from several leading economists, in particular when they have pushed for a current state secretary from the Ministry of Finance, Karolina Ekholm. He writes that a governor is similar to the Supreme Commander of the Armed Forces but for the economy and it is a broad task that requires good communication, international contacts, integrity and is more than monetary policy.
“My conclusion is that some of the country’s more distinguished economists are worse at protecting the Riksbank’s independence than the experienced politicians, and that some economists… have not sufficiently considered several vital aspects.”
The Riksbank has left its benchmark repo interest rate at a negative 0.5 per cent but expects to raise the rate in the middle of 2018.
However the Riksbank has decided to let its current bond purchase programme expire and only invest the proceeds from maturing bonds, from January 2018. The investments will be carried out regularly over the next year. Therefore the Riksbank’s holdings of government bonds will increase.
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