Sveriges Riksbank
History
Sveriges Riksbank, also known as the Swedish National Bank, is the central bank of Sweden and the world's oldest central bank. It was established in 1668 following a banking crisis that led to the need for a national institution to control monetary policy. The bank was initially named Stockholms Banco (Bank of Stockholm) but was renamed to its current name in 1867.
Roles and Functions
As the central bank of Sweden, Sveriges Riksbank has several key roles and functions. These include maintaining price stability, ensuring a safe and efficient payment system, and managing the country's foreign exchange reserves. The bank is also responsible for issuing Swedish Krona, the country's official currency.
Price Stability
One of the primary roles of Sveriges Riksbank is to maintain price stability. This is achieved by managing inflation, which is the rate at which the general level of prices for goods and services is rising. The bank has an inflation target of 2% per annum, a figure that is common among many central banks worldwide.
Payment System
Sveriges Riksbank is responsible for ensuring a safe and efficient payment system in Sweden. This includes overseeing the country's financial infrastructure and promoting the smooth operation of payment systems. The bank also plays a role in the development and implementation of new payment technologies.
Foreign Exchange Reserves
The bank manages Sweden's foreign exchange reserves, which are assets held by the bank in currencies other than the Swedish Krona. These reserves are used to influence the exchange rate of the Krona and to meet the country's international financial obligations.
Monetary Policy
Sveriges Riksbank implements monetary policy with the aim of maintaining price stability. The bank uses several tools to achieve this goal, including interest rate adjustments, open market operations, and foreign exchange interventions.
Interest Rate Adjustments
The bank's main monetary policy tool is the adjustment of the repo rate, which is the interest rate at which banks can borrow or deposit funds at the Riksbank for a period of seven days. Changes in the repo rate influence other interest rates in the economy, affecting the behavior of households and businesses.
Open Market Operations
Sveriges Riksbank conducts open market operations, which involve the buying and selling of government securities, to influence the amount of money in the economy. These operations can affect the repo rate and, consequently, the inflation rate.
Foreign Exchange Interventions
In exceptional circumstances, the bank may intervene in the foreign exchange market to stabilize the Swedish Krona. This involves buying or selling the Krona to influence its exchange rate.
Governance
Sveriges Riksbank is governed by an Executive Board consisting of six members. The board is responsible for decisions on monetary policy and other matters. The members of the board are appointed by the General Council, which is elected by the Swedish Parliament.
See Also
Monetary Policy Central Bank Inflation Targeting Foreign Exchange Reserves