Martin Flodén: My thoughts on the Sveriges Riksbank's asset purchases

Speech by Mr Martin Flodén, Deputy Governor of the Sveriges Riksbank, at a lunch meeting arranged by Handelsbanken, Stockholm, 14 December 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Accompanying slides of the speech

After buying assets for eight years, the Riksbank is planning to conclude the purchases at the end of the year. At the same time, the rapidly rising interest rates mean that the value of the assets we have purchased has fallen. The Riksbank will therefore in all probability report a large financial loss for 2022, and our equity can become negative as a result. How should we actually view the
role of asset purchases as a monetary policy tool in the light of recent years' experience?

My conclusions can be summarised into three points:

• There are no clear indications that the Riksbank's purchases of government bonds during the period from 2015 to 2019 resulted in lower financing costs for households and companies. The purchases nevertheless appear to have contributed to strengthening confidence in the inflation target, and may therefore have contributed to both inflation and inflation expectations rising from 2015 to 2017, and then remaining close to 2 per cent for a few years.
• The Riksbank's purchases during the coronavirus crisis were important and contributed to the financial markets continuing to function, to the economic recovery being rapid, and helped avoid a prolonged recession. This was of great value to the economy. On the other hand, I find it difficult to see the value of later increasing and prolonging the asset purchase programme in a situation where the economy was recovering rapidly and the financial markets were functioning again.