Aino Bunge: Inflation is in the process of stabilising at the target, but the way forward is not entirely smooth

“At our most recent policy rate meeting at the end of March, I noted that we were moving towards an easing of monetary policy and that we can probably cut the policy rate in May or June if the inflation outlook remains favourable. A lot has happened since then, even though it has only been three weeks.” 

"The March inflation outcome was clearly lower than expected and price growth rates declined broadly. It is very pleasing and good for the Swedish economy that the previously excessively high inflation has fallen back. But this must be weighted against the risks to inflation going forward.”

Ms Bunge emphasised that although the Riksbank conducts an independent monetary policy, it cannot and should not ignore what is happening abroad.

“Geopolitical risks remain highly present. Although we have not recently seen any major supply disruptions, we are monitoring developments closely. We also see that the US economy is continuing to surprise on the upside and that this may also affect the decline in inflation in Sweden. In this environment, a small currency like the krona becomes particularly vulnerable and a weaker exchange rate is a clear upside risk for Swedish inflation.”

Ms Bunge said that this, together with continued vigilance regarding companies' pricing behaviour, is an example of factors that need to be weighed up in order to assess how tight monetary policy should be.

“We need a learning approach when adjusting monetary policy and assessing how firms and households react to a tightening monetary policy as inflation approaches the target. Prior to our next monetary policy meeting on 7 May, we will have to weigh up how everything that has happened since the last meeting affects the possibilities of achieving sustainably low and stable inflation in Sweden."