Anna Breman: The inflation target – an anchor for price-setting and wage formation
“As inflation is now approaching the target, the conditions are in place for a recovery in the Swedish economy and higher real wages.” These were the words of First Deputy Governor Anna Breman, when she spoke today at the seminar “Economic conditions in the run-up to wage negotiations”, organised by the Association of Swedish Engineering Industries and the Swedish Association of Industrial Employers.
Date: 04/06/2024 12:00
Speaker: First Deputy Governor Anna Breman
Place: Teknikföretagen, Storgatan 5 Stockholm
Anna Breman, First Deputy Governor.
Several factors have contributed to the fall in inflation, Anna Breman said. Monetary policy has dampened demand on the economy, supply shocks have subsided and wage formation has been responsible.
“The Swedish wage formation model has an advantage compared to many other countries and has likely contributed to better employment growth in Sweden.”
Despite high inflation, long-term inflation expectations among economic agents have remained well anchored at 2 per cent. This shows confidence in the inflation target, Anna Breman said.
“The recent development in inflation and economic activity indicates inflation close to target. If the outlook for inflation holds, the policy rate may be cut two more times during the second half of this year.”
But Anna Breman also stressed the risks of setbacks and the need for monetary policy to be adjusted to the outlook.
“The division of responsibilities in the Swedish economy is clear. The Riksbank’s task is to ensure that inflation remains close to target, as this is a prerequisite for long-term economic growth in the Swedish economy. There are favourable conditions for inflation to remain sustainably low and stable, and we will adjust monetary policy to ensure that this happens.”