Skingsley on developments in the summer: Strong recovery with weak inflationary pressures

“We have had a high pressure summer not only with regard to weather, but also the economy.” This comment was made by First Deputy Governor Cecilia Skingsley when she opened Danske Bank’s Group Treasurer seminar with a summary of economic developments over the summer.

Date: 27/08/2021 13:00

Speaker: First Deputy Governor Cecilia Skingsley

The rapid recovery from the pandemic that we have envisaged is now well under way, said Ms Skingsley. Economies have actually grown slightly faster than expected over the summer, both the euro area and Sweden. At the same time, the spread of the corona virus has increased again in several countries and the substantial differences in the degree of vaccination between countries is creating uncertainty over the future development of the pandemic.

Both households and companies are optimistic about future developments, which is a sign of the high level of growth we are expecting to see in the recovery phase. Inflation has also been slightly higher than expected during the summer. This is mainly because electricity prices increased more than expected. Excluding energy prices, inflation is low, 0.5 per cent, and cost pressures are weak.

“On the whole, I do not think that the picture of the economic situation has changed in any dramatic way this summer,” said Ms Skingsley. “On the one hand, the Swedish economy is now growing at a slightly faster pace and inflation has become slightly higher than we had forecast in July. But on the other hand, inflationary pressures remain weak and the uncertainty surrounding the pandemic has essentially increased.”

“We concluded at our monetary policy meeting in July that we need sustainability in our monetary policy for inflation to be close to 2 per cent in the long term. At our next meeting, in late September, we will need to weigh together the information received up to that point and assess how monetary policy can best contribute to a good development of the economy and to continuing confidence in the inflation target,” concluded Ms Skingsley.

Updated 31/08/2021