Riksbank draws lessons from 2015-2024 monetary policy evaluation
Riksbank Governor Erik Thedéen presented the Executive Board's lessons from the 2015-2024 monetary policy evaluation at a Riksdag Committee on Finance hearing. The review period was marked by unique challenges, including the pandemic, Russia's invasion of Ukraine, and fluctuating inflation.
Rethinking asset purchases
Transparency and evaluation are central to building confidence in the Riksbank's monetary policy responsibility, Governor Erik Thedéen stated at the Riksdag Committee on Finance hearing.
He noted that the 2015-2024 period, evaluated by Morten Ravn and Carolyn Wilkins, was unique and offered valuable lessons.
The era was characterized by major challenges, including the pandemic, Russia's invasion of Ukraine, and inflation that swung from too low to too high.
Thedéen specifically addressed the Riksbank's experiences with securities purchases and sales.
He emphasized, "In unusually difficult monetary policy circumstances, asset purchases are a possible measure.
But the threshold for that should be high.
Based on the experiences of recent years, there are reasons for us to develop our analysis and framework for how these measures should be designed and finalised, taking into account both costs and risks.
" This indicates a commitment to refining the central bank's approach to unconventional policy tools.
Sharpening data analysis and collaboration
A key lesson from the high-inflation period is the necessity for the Riksbank to analyze more high-frequency and disaggregated data to rapidly detect shifts in inflation dynamics.
Governor Thedéen highlighted, "Today, we are looking even more at 'micro data' and we are constantly striving to better understand how different shocks propagate through the economy.
" He added that active efforts are made to integrate diverse research perspectives into interest rate decision processes to avoid groupthink.
The Executive Board also agrees with the evaluators on the need to enhance information exchange between fiscal and monetary policy.
Mr Thedéen noted that regular discussions are already held with the Ministry of Finance, operating within a clear framework that permits open dialogue without instruction.
Crucial self-reflection for future resilience
This hearing underscores the Riksbank's commitment to transparency and continuous learning from past policy decisions.
The emphasis on refining asset purchase frameworks and leveraging micro-data suggests a more agile and evidence-based approach to future challenges.
Such proactive self-assessment is vital for maintaining public trust and adapting monetary policy effectively in an increasingly complex global environment.