Riksbank deputy flags danger of leaning against the wind

Karolina Ekholm, a deputy governor of the Sveriges Riksbank, today spoke out against the central bank's policy of 'leaning against the wind', using monetary policy to try to tackle high household indebtedness.

Sweden has been struggling with the twin problems of below-target inflation and low capacity utilisation, balanced by high debt levels. In remarks to the Confederation of Swedish Enterprise in Stockholm, Ekholm said the executive board's decisions not to cut interest rates had been a "contributory factor" to the low inflation, while only having a "minor" effect on indebtedness.

Swedish CPI inflation dipped to -0.2% in February, Ekholm said. She noted that this seemed to have spurred the board into action, which now shows a "greater focus than before on inflation".

"Perhaps the lesson here is that a monetary policy that leans against the wind is difficult to combine with an inflation target," Ekholm said. "In practice, one tries to attain two targets with one single instrument and there is then a risk that one will not be particularly successful in attaining either of them."