Swedish CB Should Factor in Wider Economy, Government Says

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STOCKHOLM, May 28 Reuters Swedens government said on Friday the central bank should factor economic developments as well as its main target of 2 inflation into monetary policy as it outlined plans for a new operating framework for the Riksbank.

Central banks around the world have had to shoulder greater responsibilities for economic policy in recent years, often without a clear framework, and many countries are now looking at regulatory reform to improve the response to future crises.

The government said the Riksbanks primary goal should be low and stable inflation, but that it should take a more holistic view of economic developments, much like the approach introduced by the U.S. Federal Reserve last year.

The primary goal for the Riksbank shall be to maintain low and stable inflation, the government said in a statement. Without setting aside price stability, the Riksbank should, furthermore, contribute to a balanced development of production and employment.

An inquiry in 2019 suggested significant changes to legislation governing the Riksbank clarifying which policy tools it should have, codifying its role in maintaining financial stability and giving parliament the final say over the inflation target.

The governments proposals retain most of those suggestions, which were openly opposed by the Riksbank and widely seen as limiting its policy toolkit.

Riksbank policymakers have said that, if the original proposals had been implemented in early 2020, they could…

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