Henry Ohlsson: Monetary policy and inflation in times of war

Speech by Mr Henry Ohlsson, Deputy Governor of the Sveriges Riksbank, at the Uppsala University, 17 May 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

The 2020s could certainly have begun better. Following a pandemic, which we still haven't quite seen the end of, another war has broken out in Europe. As information now spreads faster than ever before, via news channels and social media, and as it is a country quite close to us that has been affected, the war in Ukraine has shaken us more than usual in our safe Swedish everyday lives. That, at least, is how I feel.

However horrific the war in Ukraine may be, it is not the war as such that I intended to talk about today, but its economic consequences – and those of war in general. After all, it is in the field of economics that I have my comparative advantages, and as policy-maker at a central bank, monitoring the economic consequences is, of course, something that is part of my job. I will focus on the effects on inflation, as they are particularly important for a central bank.

When major and unusual events such as a war occur, there is no 'manual' for how to act as an economic policy decision-maker. All wars are different – in terms of their scale and duration, their location and their impact on the world around them. Instead, we must brush up on our possible knowledge of history and try to see if there are past historical episodes from which we can learn something for the current situation. It is of course also important to study the available literature on the economic consequences of war to see whether it is possible to find common denominators that can give clues regarding the situation that has arisen.