Sweden’s Riksbank has “fairly good” prospects to bring inflation back toward its 2% target and avoid persistent price increases, though there will be short-term economic pain, Deputy Governor Per Jansson said.
(Bloomberg) — Sweden’s Riksbank has “fairly good” prospects to bring inflation back toward its 2% target and avoid persistent price increases, though there will be short-term economic pain, Deputy Governor Per Jansson said.
“Unfortunately there is no way out of this situation that doesn’t entail costs,” Jansson said in a speech in Stockholm on Thursday. “It will be tough, no question about that, but the worst we could do is to repeat the mistakes of the 1970s and 1980s.”
Jansson’s comments come after the central bank raised its benchmark rate to 3% in a bid to slow price increases that reached a three-decade high in December. The Riksbank’s moves are squeezing highly indebted Swedish households, and the Nordic country’s economy is expected to have the worst development of all European Union nations this year.
The deputy governor said signals from ongoing wage negotiations indicate that the risk of a wage-price spiral is low and expectations on inflation remain fairly well anchored, meaning there are “relatively benign” prospects to prevent high inflation from becoming entrenched.
At the meeting last week, the Riksbank also announced that it will start selling government bonds, in a move partly intended to shore up the Swedish krona. Jansson said the measure appears to have had the desired effect.
“It seems that the sentiment around the krona has changed somewhat, which is positive,” he told reporters after the speech. “If that continues, it is welcome in this situation of high inflation, but you should be cautious. The playing field can change rapidly and things can happen that we have no way of influencing.”
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