Per Jansson: Responsible wage formation pays off
“The risks of inflation becoming too high have diminished quite significantly over the year. This means that we can proceed a little more decisively with our monetary easing. In September, we cut the policy rate for the third time in a short period of time, and we signalled that more cuts are likely going forward. This helps to strengthen economic activity and hold inflation close to the target." This was the message from Deputy Governor Per Jansson, speaking today at the Swedish National Mediation Office's conference on socioeconomic conditions for wage formation.
Date: 23/10/2024 13:30
Speaker: Deputy Governor Per Jansson
Place: Hilton Stockholm Slussen Hotel
Per Jansson, deputy governor.
When high inflation hit Sweden, the social partners played an important role in preventing a price-wage spiral, said Mr Jansson.
"Responsible wage formation helped us to avoid raising the policy rate as sharply as would otherwise have been necessary, and also meant that we could cut the policy rate earlier and faster than was possible in many other countries."
The rise in inflation led to a sharp drop in real wages for workers. Now that inflation is close to the target again, real wages are increasing once again. Add to this falling interest costs and purchasing power is expected to recover relatively quickly. Together with fiscal policy measures, this will contribute to the economic recovery," said Mr Jansson.
“It is important in itself that economic activity strengthens, but it is also a necessary condition for inflation to stabilise close to the target. If the inflation outlook is such that we can cut interest rates further this year and also some way into next year, that would lead to fairly large stimulus that should help to boost economic activity in the economy substantially."