Riksbank backs key recommendations in monetary policy evaluation
The Riksbank's Executive Board welcomes the independent evaluation of Sweden's monetary policy from 2015–2024 and agrees with many of its recommendations. The Board emphasizes the importance of external scrutiny for central bank independence and continuous policy improvement.
Strengthening the toolkit for future crises
The Executive Board agrees that unconventional measures like negative rates and asset purchases may be needed again, especially when the policy rate is near its lower bound and inflation target credibility is threatened.
Asset purchases, particularly of non-government securities, will have a high threshold due to financial risks and legal requirements.
The Riksbank will continue to analyze the effects, design, and unwinding of these measures, aiming for a more structured framework.
Operational readiness for asset purchases is crucial, contributing to policy credibility even in normal times.
The Riksbank established a long-term holding of government bonds in November 2024 to enable regular trading, amounting to a nominal value of SEK 20 billion, reflecting the composition of outstanding nominal government bonds with remaining maturities of 1 to 15 years.
Enhanced dialogue and capital resilience
The Board supports increased information exchange between monetary and fiscal authorities, especially during deep recessions, while respecting institutional independence.
Regular discussions with the Ministry of Finance are already in place, and the Riksbank will deepen analyses of fiscal-monetary interactions.
However, the Board deems it difficult to coordinate the Debt Office's borrowing with the Riksbank's unconventional operations due to potential conflicts of roles and responsibilities.
Regarding its capital framework, the Riksbank sees no need for review, citing recent legal changes in January 2025 that allow for self-financing through interest-free deposits when equity falls below target.
The Board believes these measures strengthen the Riksbank's financial resilience.
Prudent evolution, not radical overhaul
The Riksbank's response signals a cautious yet pragmatic approach to its future policy toolkit, acknowledging past challenges while emphasizing preparedness.
While largely endorsing the evaluation's spirit, the Board prioritizes flexibility over rigid rules for unconventional measures and inter-agency coordination.
This stance underscores a commitment to independence and a measured evolution of its operational framework, rather than a radical departure.