November 29, 2019 / 2:06 PM / 15 days ago

Swedish government proposes hefty changes to central bank law

STOCKHOLM, Nov 29 (Reuters) - The Swedish government on Friday proposed a law that would reduce the central bank governor’s influence, extend the bank’s mandate to include promoting economic growth, and give parliament a say in changes to the bank’s inflation targets.

A government committee proposed reducing the number of rate-setters at the Riksbank to five from six, meaning the governor would no longer have the casting vote in the event of a tie. The new law would not take effect until 2023 if passed, due to rules regarding major legislation.

“If you have a board with many members ... it is strange to give preference to one person,” committee chairman Mats Dillen said. “In context, the governor of the Riksbank will have slightly less power.”

Governor Stefan Ingves, now in his third term as governor, used his casting vote in December 2016 in favour of extending bond purchases and prior to that in 2008.

The government appointed the committee in 2016 to see whether changes to how the Riksbank operates were needed in the wake of the financial crisis of 2008-9.

Most of its proposals, outlined first in October, clarify the role of the Riksbank and its targets and tools rather than focusing on changes to how it operates.

Some proposals are new, however.

The Riksbank’s role in maintaining financial stability would be written in to law, and parliament’s oversight of the central bank would be strengthened.

Lawmakers would also have to approve any changes to the inflation target which the Riksbank currently sets independently.

The law also envisages giving the central bank a secondary goal of promoting economic growth, much like that of the Federal Reserve in the United States.

“Without setting aside its goal of low and stable inflation, the Riksbank should contribute to a balanced development in production and employment,” the committee said.

The Fed is currently carrying out a review of its operations and the European Central Bank will start one next year, as major central banks take stock after a decade of unprecedented policy experiments. (Reporting by Simon Johnson; Editing by Hugh Lawson)

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