Anna Seim: Important to safeguard the role of the inflation target as a nominal anchor

She also commented on the latest policy rate increase, explaining why it is so important to curb inflation in good time. “High inflation affects absolutely everyone. It leads to a widespread erosion of real incomes and purchasing power, but hits households with limited means the hardest. It is therefore in the interest of society as a whole that inflation remains low and stable.” 

Ms Seim reiterated the points she made at the most recent monetary policy meeting, when the policy rate was raised to 2 per cent. A stronger economy and higher costs for companies as a result of global supply disruptions mean that inflation is expected to rise above the target. 

“As it takes time for monetary policy to have its full effect on the economy, we need to act now to curb inflation. It is through such forward-looking policy that we preserve the value of money and create conditions for broad-based increases in prosperity in the long term."

Ms Seim explained that, when the Riksbank makes decisions on the interest rate, it takes fiscal policy and wage trends as given. As interest rate decisions are taken considerably more frequently than decisions on budgets and wage agreements, the Riksbank adjusts its monetary policy in line with these external conditions.

“We aim to clearly communicate our reaction function to other economic actors – how we are likely to react if the economy develops in a certain way. In this way, we try to be a predictable, stabilising force.” 

Ms Seim also discussed how AI might affect the Riksbank’s areas of responsibility. She noted that higher productivity, for example, can affect the neutral interest rate and thus the conditions for monetary policy, whilst easier price comparisons and dynamic pricing alter the way market participants behave. Furthermore, AI can influence the functioning of financial markets in various ways. 

“AI has the potential to impact the real economy across the board, and many researchers and analysts are currently considering the implications of this. Central banks must also prioritise issues relating to AI and inflation, such as how AI might alter companies’ pricing behaviour and what this entails for the trade-offs we are facing.”