Anna Seim in Västervik: Favourable conditions for managing the uncertain road ahead

At the beginning of the year, we noted that a recovery had begun in the Swedish economy. Household finances are continuing to benefit from rising real wages and from the fact that interest costs are clearly lower today than a year ago. "But the US administration's erratic trade and security policies risk hampering progress going forward.” 

Ms Seim sees two main tracks as to how this will affect the Swedish economy. One is that the uncertainty makes households and businesses so cautious that they save more and invest less, which would lead to a drop in demand. Another is supply-side disruptions, where global value chains break down and shortages of inputs and consumption goods occur in different parts of the world. "Whether inflation falls or rises going forward will depend on which of these forces dominates. In addition, behind the scenes there are factors such as effects of increased defence spending, a possible influx of Chinese goods into the European market, and sudden fluctuations in financial flows.”

We do not yet know which tariff threats will actually materialise and there is so far only a limited amount of data on how the economy has evolved since the shift in US trade policy. “In this environment, it is particularly valuable to visit different parts of the country and gain insight into what companies encounter and how they reason.” 

Ms Seim stressed that the need to wait for reliable signals should not be interpreted as a reluctance to act. “The neutral interest rate level we are starting from provides us with favourable conditions to navigate the uncertain road ahead. If the outlook for inflation and economic activity shows that this is warranted, we will adjust the policy rate.”