Flodén: Monetary policy will bring inflation back to target

“The Riksbank's monetary policy obviously cannot affect the high international commodity and shipping prices and it is unavoidable that near-term inflation will remain high. But our monetary policy can ensure that inflation does not remain persistently high”. These were the words of Deputy Governor Martin Flodén when he spoke at Dagens Industri’s Risk and Return conference in Stockholm.

Date: 06/04/2022 09:00

Speaker: Deputy Governor Martin Flodén

Place: DI Risk and Return, Grand Hotel Stockholm

In his speech, Flodén discussed what monetary policy can achieve in this situation and described the three channels through which it can operate: the exchange rate; expectations and confidence in the inflation target; and economic activity.

“To understand the appropriate timing and strength of our monetary policy response, we need to consider how robust inflation expectations and wage formation currently are and how economic activity will be affected by recent developments,” Flodén said.

“In the coming weeks I will analyze and discuss with my colleagues the precise implications of all this for our monetary policy. There will also be new information and data releases to process in the three weeks prior to our next policy meeting. I want to emphasize that we therefore have not yet concluded what the monetary policy decision will be. It is, however, already evident that we must reassess and substantially adjust our plan for monetary policy. This means that we must raise the policy rate much earlier than we planned in February,” Flodén concluded.

Read the full speech from Martin Flodén here.

Updated 06/04/2022