Riksbank’s Svensson Leaves After Failing to Gain SupportJohan Carlstrom
Riksbank Deputy Governor Lars E.O. Svensson will leave the Swedish central bank’s board when his term expires next month after failing to win backing for his calls for deeper interest rate cuts.
“It’s appropriate for me to leave,” Svensson said at a press conference in Stockholm today. “I haven’t managed to gain support for a monetary policy that I think would lead to a better target fulfilment with both a higher inflation closer to the target of 2 percent and a lower unemployment.”
Svensson, who taught at Princeton University alongside Federal Reserve Chairman Ben S. Bernanke early last decade, has advocated for bigger rate cuts than the majority of the bank’s board, arguing his colleagues’ policies since 2010 have cost the largest Nordic economy 60,000 jobs.
Headline inflation reached zero in March, after prices fell an annual 0.2 percent in February.
The krona gained 0.4 percent to 8.5064 per euro as of 10:12 a.m. in Stockholm after the announcement. The move left it the day’s best-performing major currency against the dollar, the yen and the euro, according to data compiled by Bloomberg.
“We saw immediately an effect on the krona,” said Annika Winsth, chief economist at Nordea Bank AB. “He’s belonged to the dovish camp and that means that there is a slightly bigger likelihood that they will raise a little bit earlier than if he had remained.”
Svensson’s six-year term expires on May 20. He and fellow Deputy Governor Karolina Ekholm were the only two of the board’s six members to argue in favor of lower rates at the bank’s policy meeting last week. Governor Stefan Ingves has warned that keeping rates too low too long risks fueling unsustainable credit growth.
“It’s healthy to have a person on the board that looks at things from a different angle and, in that sense, his way to work has been good,” said Winsth. “But it hasn’t been good for the Riksbank and its reputation both in Sweden and abroad that there’s been a tone that clearly is quite tough between board members.”
“We would like to thank Lars E.O. Svensson on behalf of the General Council for the valuable work he has done during his time at the Riksbank,” Johan Gernandt, chairman of the general council, and Sven-Erik Oesterberg, vice chairman, said in a joint comment. “With his solid academic background he has provided an excellent contribution to developing the analysis work at the Riksbank and has successfully created interest in monetary policy issues both in Sweden and abroad.”
The bank is also looking for a replacement for Deputy Governor Barbro Wickman-Parak, who said last month that she will leave when her term expires in May.
Winsth said replacements may include Mats Dillen, director general at the National Institute of Economic Research, and Susanne Ackum, state secretary at the Finance Ministry.