Erik Thedéen: Reflections on the high inflation in recent years

Thank you for inviting me to this traditional meeting of the Swedish Economic Association. In my calendar, this meeting is a sign of spring and an event to look forward to. Here I have the chance to discuss a topic in a little more depth and also have the opportunity to highlight new and interesting analyses by staff at the Riksbank.

The last few years have been tough and turbulent. First came the pandemic, plunging the whole world into a huge health crisis that also had a major economic impact. As the world began to recover from the pandemic, Russia invaded Ukraine, which, in addition to the human suffering, has also had major economic consequences and led to geopolitical tension. Moreover, since last autumn, a war between Israel and Hamas has fuelled geopolitical unrest and led to terrible humanitarian consequences. So there are still many storm clouds and in that sense this turbulent period is not over. But from an inflation perspective, things look much brighter now.

When I was here last May, inflation was still too high. The Riksbank had raised the policy rate by 0.5 percentage points to 3.5 per cent in April, and we emphasised the importance of inflation quickly coming down to the inflation target. To ensure this, we then raised the policy rate to 4 per cent, and we have kept it at this level since September last year, until two weeks ago (see Figure 1). Meanwhile, CPIF inflation has been trending down towards 2 per cent and we have now started to cut the policy rate.