Aino Bunge: Important for inflation to fall significantly this year

“It is a tough situation for many people when inflation is this high, and interest costs are rising. But by raising interest rates, we reduce the risk of inflation problems becoming even worse and more persistent. Low and stable inflation is a prerequisite for a strong development of the Swedish economy going forward," said Aino Bunge.

Underlying inflation has not yet shown clear signs of falling and it will take time for monetary policy to have full impact. “We have said that it is important to bring inflation down within a reasonable time. And that time perspective should be relatively short if we are to maintain confidence in the inflation target in these challenging circumstances. We have a year of sharply rising inflation behind us, but this year we want to see it start to fall towards the two per cent target," Aino Bunge added.

She also mentioned that household debt and house prices have been on a rising trend for several decades. A vulnerability that the Riksbank has been pointing out for a long time. “Swedish households are considerably more interest-rate sensitive than they were when the Riksbank raised the policy rate on previous occasions, not just in light of their heavy debt burden but also due to the short interest-rate fixation periods on their loans. This is something we have to take into account in monetary policy.”

There are strong indications that inflation will fall back during the year, but Aino Bunge stressed that we live in uncertain times and that inflation must fall far enough and sufficiently broadly. "Our policy-rate path in February indicated that the rate is likely to be raised further in the spring. Before our next monetary policy meeting at the end of April, we will have several statistical outcomes and indicators that could affect the inflation outlook and the shaping of monetary policy. We will do whatever it takes to bring inflation down," Aino Bunge concluded.