Per Jansson: Reassuring inflationary pressures but uncertainty abroad
"We have now cut the policy rate four times in six months, by a total of 1.25 percentage points. This has been gradual, but also fairly rapid, and more than in almost all other comparable countries. A lower interest rate strengthens households' purchasing power and contributes to the economic recovery. If our economic and inflation outlook holds, we can cut the policy rate again in December and during the first half of 2025. However, we live in an uncertain world and we always need to be prepared to adjust our interest rate plan if conditions change.” These comments were made by Deputy Governor Per Jansson, speaking about the economic situation today at the Chamber of Commerce and Industry of Southern Sweden in Växjö.
Date: 27/11/2024 08:30
Speaker: Deputy Governor Per Jansson
Place: Chamber of Commerce and Industry of Southern Sweden
Per Jansson, deputy governor.
At the moment, energy prices are pushing down CPIF inflation below the inflation target of 2 per cent. But this effect is judged to be temporary and, excluding energy prices, inflation has been close to 2 per cent for almost six months. “This shows that we have inflationary pressures in line with the target, which is reassuring.”
Mr Jansson said that the risks of too high inflation had decreased significantly over the course of the year. There is now a greater risk of inflation being too low than too high, at least given the weak demand in the Swedish economy. “There are some green shoots, but the recovery is slower than expected. It is important in itself that economic activity strengthens, but it is also a necessary condition for inflation to stabilise close to the target.”
But despite this, he still sees risks that could lead to higher inflation. “In addition to the considerable uncertainty created by the geopolitical situation, I am rather concerned about the weakness of the krona exchange rate. News about the US economy seem to have been the main driver of this development. Swedish monetary policy does not appear to be a factor of major importance in this context. However, this is of little consolation. If the trend of a weaker krona continues, it will sooner or later affect inflation and thus monetary policy."
If the outlook for inflation and economic activity remains the same, the policy rate can be cut again in December and during the first half of 2025, in line with what we communicated in September,” said Mr Jansson. "However, we will receive a lot of important new information before our next decision on 18 December. We will then return with the implications for the outlook and the appropriate monetary policy stance to contribute to an inflation rate close to the target.”