Flodén and Ingves at the Riksdag Committee on Finance Monetary policy needs to be sustained
News, Speeches The Swedish economy has recovered rapidly in the pandemic, supported by extensive economic policy measures. This comment was made by Governor Stefan Ingves in his introduction, when he and Deputy Governor Martin Flodén today took part in the second hearing of the year at the Riksdag Committee on Finance.
“We are now moving from a very rapid recovery to more normal growth rates,” said Governor Ingves. The rapid recovery and sharply rising energy prices have caused inflation to rise rapidly in some parts of the world, including Sweden. But some time into next year it is expected to fall back again. “Underlying inflation is moderate, which indicates a CPIF-inflation rate close to the target in the longer run. But this presupposes that monetary policy remains expansionary,” said Stefan Ingves. “As long as we do not see any signs of a persistently increasing inflation rate, or inflation expectations that rise in a worrying manner, we should proceed with caution when it comes to making monetary policy less expansionary.”
Deputy Governor Flodén also focused on inflation in his introduction. “In light of inflation having been below 2 per cent for many years, the fact that it has now risen is a welcome development. This may help to ensure that inflation expectations are not too low and strengthen confidence in the inflation target,” said Martin Flodén. "Inflationary pressures are not very strong, which indicates that the upturn is transitory. However, I think that the risks of inflation being higher than in our forecast have increased. We need to monitor continuously how high energy and producer prices affect other prices, inflation expectations and wages,” he concluded.