Erik Thedéen in Copenhagen and Malmö: Inflation outlook has improved, but risks remain

“The outlook for inflation has continued to improve and the risk of inflation becoming entrenched at levels that are too high has declined. We are therefore approaching a situation where the need to conduct a contractionary monetary policy is declining. However, the risks of setbacks still remain. Exchange rate developments in particular create uncertainty. A weaker krona could provide unwanted inflationary impulses.” 

Mr Thedéen said that the Riksbank needs to continue to monitor the development of the krona closely and when leading central banks abroad plan to start easing monetary policy.

“But we should not link Swedish monetary policy directly to other central banks’ actions. It is inflationary pressures and the outlook for inflation here in Sweden that determine our monetary policy.”

Mr Thedéen also mentioned geopolitical concerns, companies’ pricing behaviour and uncertainty over how the economy will react to signals of lower interest rates as reasons for the Riksbank to proceed cautiously with interest rate cuts.

“The uncertainty is an argument for cautious, gradual interest-rate easing that gives us the opportunity to closely follow and evaluate how the economy reacts. It improves the conditions for attaining stable economic developments with inflation in line with our target of 2 per cent.”