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Riksbank unveils new board members

Sweden's central bank has appointed two new board members plucked from banking and academia to replace two outgoing members, one of whom was an outspoken critic of the Riksbank's commitment to the government's inflation goal.

Riksbank unveils new board members

Swedbank chief economist Cecilia Skingsley and Stockholm University economics professor Martin Flodén will join the team of six board members who set Sweden’s benchmark interest rate, or repo rate.

Skingsley as late as April said she thought the central bank should lower interest rates, citing “weak macroeconomic horizons”.

“I find it a bit difficult to understand why the board refrained from lowering the interest rate,” she said at the time in a video published on Swedbank’s website.

SEB Bank chief strategist Johan Javeus told the TT news agency that both Skingsley and Flodén were appropriate choices for the governing board, and underlined they were not dissimilar to their predecessors – Barbro Wickman-Parak and Lars E.O. Svensson.

Svensson has disagreed with bank governor Stefan Ingves over the management of the repo rate, stating in public that lowering it earlier on when the financial crisis hit Europe could have had an effect on employment rates in Sweden. The Riksbank is tasked, however, with maintaining the two-percent inflation rate set as a target by the government.

“One can assume that Flodén, with his academic background, could come to the same conclusions as Svensson,” Javeus said.

“Skingsley is closer to the market and is probably a very good communicator.”

The appointments were made by the bank’s delegate body – whose members are named by parliament to oversee affairs at the independent central bank. Its chairman, Johan Gernandt, and his deputy Sven-Erik Österberg said on Thursday they were “very pleased” with the appointments of Skingsley and Flodén.

“(They) both have a lot of experience in finance and macroeconomics, and their backgrounds complement the governing board’s other members.”

The Left Party, meanwhile, said it was time to discuss the closed-doors selection process. It is the only party, alongside the Sweden Democrats, that does not have a representative on the delegate board (Riksbankfullmäktige).

“This is Swedish version of the papal election; it has no place in a democratic society,” said the party’s financial spokeswoman Ulla Andersson in a text message to TT.

She said the candidates for the board should be questioned by parliament and relevant parliamentary committees before appointments were made.

“It is important to know how they view monetary policies, the labour market and their role. The process we have now is outdated.”

TT/The Local/at

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ECONOMY

Riksbank deputy ‘open to reconsidering raising rates in April’

Martin Flodén, the deputy governor of Sweden's Riksbank, has questioned whether the central bank needs to bring in further rate rises in April, following bank runs on two niche banks in the US and a crisis of confidence at Credit Suisse.

Riksbank deputy 'open to reconsidering raising rates in April'

Uncertainty in the financial market following bank runs in the US and a crisis at Swiss bank Credit Suisse could have changed the playing field, he told TT in an interview. 

“It affects which level the key interest rates need to be in order to have a contractive effect,” he said, referring to the recent days of financial market turbulence. “We can’t just look at key interest rates by themselves. It’s the key interest rate in combination with all of these developments which determines how tight financial policy will be.”

He said it was not yet obvious what decision should be taken. 

“It’s clear that monetary policy needs to stay tight, but what level of interest is that? We need to assess all of the current developments there.” 

‘Could go in different directions’

In theory, there could be such a serious financial crisis, with such a severe effect on lending and banks’ financing costs, that the central bank would be forced to adopt supportive measures, even lowering the key rate.

Flodén doesn’t think Sweden is in that situation, although he thinks there’s a possibility it could happen.

“It’s not something I can see happening right now, at least, although this could go in different directions.” 

He added that he doesn’t see any reason for any “special concern”, toning down the risk that a crisis for two smaller niche banks in the US and at Credit Suisse could affect the Swedish financial system.

“Of course, it could lead to some stress, but there aren’t actually any particular signs in Sweden, which are worrying me,” he said. 

Flodén is one of six members of the Riksbank executive board, led by Riksbank chief Erik Thedéen, responsible for making a decision on whether interest rates will go up again at the end of April.

The Riksbank has indicated that a rate hike of between 0.25 and 0.5 percent from the current 3 percent rate could be necessary.

Flodén described the most recent inflation statistics for February, where inflation unexpectedly rose to 12 percent, as “not good at all”. So-called KPIF inflation, where the effect of mortgage rates is removed, rose from 9.3 percent to 8.7 percent in January. The Riksbank’s goal is 2 percent.

“It’s clear that inflation is still far too high and that monetary policy needs to be focussed on combatting inflation,” he said, adding that inflation statistics for March will be released before the central bank is due to make a decision on whether to raise rates or not in April.

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