World Economy

Sweden Seeks US-Style Monetary Policy

Sweden Seeks US-Style Monetary PolicySweden Seeks US-Style Monetary Policy

Sweden’s central bank needs to develop its model for setting interest rates and might be better off adopting a dual mandate that includes an employment target, such as the one used in the US, Prime Minister Stefan Loefven said.

While emphasizing that any changes are up to the “independent” central bank, the premier said there are grounds for developing the existing monetary policy analysis, Bloomberg reported.

“The US Fed has a clearer dual mandate and it works well there,” Loefven, a former union boss, said in an interview in Stockholm on Saturday, after a speech. “It should be able to work here. Jobs are the most important thing and it’s good to keep focus on that in different ways.”

The comments add to a debate over the Riksbank’s current mandate, which requires it to keep inflation at about 2%. The bank has been forced to cut rates well below zero to revive price growth, which has held near zero for the past three years. Unemployment is just now dipping below 7% after staying elevated for close to seven years.

Loefven, who took office last year, has pledged to bring down Sweden’s unemployment rate to the lowest in the European Union by 2020, a mission now challenged by an inflow of record numbers of refugees. Support for his Social Democratic-led bloc has slumped to the lowest level in more than two decades, a recent poll showed.

While joblessness is now falling, “we need to do much more as unemployment is still far too high,” Loefven said.

Meanwhile, the refugee inflow is putting pressure on Sweden to provide places to live amid a housing shortage and jobs to the newly arrived. According to Loefven, the influx means that Sweden will delay achieving a balanced budget, “which also means borrowing will continue.”

“It turns out it was lucky that we reduced the deficit, so that we have some room now,” he said.

The government has been forced to impose border checks and backtrack on giving out permanent residencies after 80,000 people arrived in the course of just two months, overwhelming its reception services. The number of asylum applications in the Nordic country of 9.8 million people is expected to climb to as much as 170,000 by the end of the year, according to its migration agency.

 Farewell to Physical Money

How long will Swedes continue queuing at cash machines to get their Kroner? The answer is, maybe not that long at all, says Euronews.

Sweden already uses less physical money than any other country and could be set to become the world’s first cashless society over the next few years.

Swedish Central Bank data shows that between 2009 and 2014 the total value of the banknotes and coins in circulation dropped from €11.3 billion to €8.5 billion.

Technology expert Niklas Arvidsson, an Associate Professor at the Royal Institute of Technology in Stockholm, says cash may be phased out in a decade, or even earlier.

“Previously, I had always said that around the year 2030 Sweden will, in effect, become cashless–meaning that cash will cease to play any real role in society. But when I look at the developments over the last two years, I actually now think that it will happen faster than that,” he says.

Payments made by credit cards and mobile phone apps have been rising sharply. Shop owners say having no cash in the tills reduces their risks of being robbed.

There are some concerns, particularly among older generations who did not grow up with hand-held technology, that it might be a mistake to say goodbye to cash too soon.

But there appears to be no stopping the digital payment revolution.