MNI EXCLUSIVE: Riksbank Outsiders Back Hike, Insiders Cautious

By David Robinson and Jai Lakhani

     LONDON (MNI) - With the Riksbank poised to hike its benchmark rate either

in December or February, an MNI analysis of executive board voting patterns

reveals how the governor almost always ends up on the winning side and that

"insiders" are more cautious about policy change than "outsiders".

     At the October board meeting two members of the six-strong board opted for

a 25-basis-point hike, with Governor Stefan Ingves among the four favouring no

change. Historically, Riksbank governors are not minority voters and at present

the governor and other long serving Riksbank officials on the board are

resisting earlier tightening.

     At the October meeting the majority on the Executive Board concluded that

it would be appropriate to start tightening "either in December or February." On

past precedent, if Ingves opts for a hike in one or the other of these months

his choice will end up in the majority.

     The question of whether and why insiders are more reluctant to change

policy has been topical in recent years. Kristin Forbes, a former Bank of

England Monetary Policy Committee member, published work exploring the reasons

why from 2014 onwards dissenting votes in favour of tighter policy came almost

exclusively from external MPC members.

     The Riksbank board does not divide as neatly as the MPC does into internals

and externals, as the two groups on the MPC have separate legal status.

Nevertheless, Riksbank members can be split by background into insiders -- the

central bank or regulatory system veterans -- and externals, coming from

academia or the private sector.

     Ingves, First Deputy Governor Kerstin af Jochnick, who initially joined the

Riksbank back in 1977 and Deputy Governor Per Jannsson, a veteran of the bank's

economics wing, can be classified as the insiders.

     Economics professors Martin Floden and Henry Ohlsson, and journalist turned

private bank economist Cecilia Skingsley, are the outsiders.

     At the October meeting, two out of the three outsiders, Ohlsson and Floden,

voted for a hike, with Ohlsson having previously voted for one at each of the

preceding four meetings.

     No insider has voted for a rate increase since July 2014. In stark

contrast, Ohlsson has posted seven dissenting votes, all hawkish, at the 24

meetings he has attended and Floden six dissents -- two hawkish, four dovish --

at his 34 meetings.

     So far the anomaly outsider has been potential swing voter Cecilia

Skingsley, who has a 100% record of non-dissent.

     In contrast, Ingves has only been in the dissenting minority once since the

beginning of his governorship in February 2009.

     Of the total 236 votes cast by the current members, there have been 15

dissents. Of these, 13 have been by the outsiders Ohlsson and Floden, with only

two hawkish dissents from the insiders - coming, in July 2014, from Governor

Ingves and af Jochnick.

     The one time Ingves and af Jochnick did dissent from the majority vote, it

was because they only wanted to cut by 25 basis points when the committee opted

for 50 bps of easing - in line with the tendency of insiders to be more

cautious.

     The analysis suggests Skingsley is one to watch closely, but if she had

joined Floden and Ohlsson in voting for a hike at the October meeting Ingves

would still have won the day - as he has a casting vote in the event of a tie.

Member                         Number of Votes  No Dissent  Dissent

-------------------------------------------------------------------

Stefan Ingves (Insider)                     60          59        1

Per Jansson (Insider)                       42          42        0

Kerstin af Jochnick (Insider)               42          41        1

Henry Ohlsson (Outsider)                    24          17        7

Cecilia Skingsley (Outsider)                34          34        0

Martin Floden (Outsider)                    34          28        6

Voting Percentage :                                   0.94     0.06

Total:                                     236         221       15

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

[TOPICS: MT$$$$,MX$$$$]