Riksbank’s Skingsley Says Running Out of Options on Stimulus

The Swedish central bank has limited room to significantly expand its unprecedented monetary stimulus, according to Deputy Governor Cecilia Skingsley.

Luckily, the successes achieved by Riksbank’s monetary policy mean it now enjoys more independence from regional powerhouses such as the European Central Bank, Skingsley said in an interview in Sundsvall, Sweden.

”We have all the tools but there are limits since the repo rate and additional bond purchases can produce undesired side-effects,” she said. ”We don’t really know for how long future interest rate cuts will work in an effective way.”

The Riksbank was forced to respond to the ECB’s expanded stimulus to prevent a stronger krona from jeopardizing its inflation target. It has cut its main lending rate to a record low of minus 0.5 percent and has bought about a third of outstanding government bonds.

”Back then, our room to conduct a very different monetary policy, our room for maneuver, was more or less zero,” she said. ”Now, we’re in a situation where our monetary policy has had an effect, where we’re seeing inflation rising toward target and with significantly better well-anchored inflation expectations.”

Skingsley said she sees no reason to consider expanding monetary policy further, unless ”we get a considerably different view of the world economy.” For now, there are no signs that the Riksbank will be forced to significantly revise its forecasts, she said.

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