Anna Breman: Good prospects for a strong recovery, despite uncertainty in the world around us
“The fact that inflation is now low and stable is positive for everyone. Real wages are rising again and household purchasing power will strengthen significantly this year and next. Stronger domestic demand will in turn lead to a stronger labour market in the coming years. It is important that the Swedish economy recovers soon. With the high level of uncertainty about the global economy, this creates resilience and contributes to continued low and stable inflation in Sweden.” This was the message from First Deputy Governor Anna Breman when she visited Varberg on Tuesday to discuss the economic situation with local businesses and to present the Riksbank's latest interest rate decision.
Date: 19/11/2024 08:15
Speaker: First Deputy Governor Anna Breman
Place: Varbergs sparbank
Anna Breman, First Deputy Governor.
“Inflation has fallen back, and conditions are good for inflation to remain close to the target even in the medium term. At the same time, economic activity is not yet showing clear signs of strengthening. This justified accelerating the rate cuts and cutting the policy rate by 0.5 percentage points,” said Ms Breman.
At the same time, she emphasised that there are risks ahead, especially given the uncertain geopolitical situation and the discussions regarding increased protectionism.
“Trade barriers tend to lead to higher inflation and poorer growth in small, export-dependent countries. But the effects on inflation are complex and we will need to analyse trade policy and its effects on an ongoing basis. It will also be important to continue monitoring energy prices, the exchange rate, food prices and companies’ price-setting behaviour."
Ms Breman also commented on the latest inflation outcome, which showed that the CPIF was at 1.5 per cent and the CPIF excluding energy was at 2.1 per cent in October.
“Energy prices are still contributing to CPIF inflation being below two per cent. At the same time, the outcome confirms the trend of rising food prices in recent months. This is important to monitor, not least when a weak krona risks pushing up the price of imported food. Overall, however, my assessment is that inflation is close to the target and the new inflation outcomes do not change the view that inflation will remain low and stable in the medium term."
Ms Breman concluded by commenting on how she sees the policy rate going forward.
“If the outlook for inflation and economic activity remains the same, I envisage the policy rate being cut further at the next monetary policy meeting in December and during the first half of 2025, in line with what was communicated in September. But we need to be aware that inflation could be either higher or lower going forward. If the outlook for inflation changes, the Riksbank will adjust its monetary policy.”