Anna Breman: Monetary policy decision-making

Speech by Ms Anna Breman, First Deputy Governor of the Sveriges Riksbank, at the Lund University School of Economics and Management, Lund, 30 May 2024.

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

The Riksbank has a mandate from the Swedish parliament, the Riksdag, to maintain price stability. If inflation deviates from the target, the policy rate is our main tool to bring inflation back to target over time.

To justify and explain our monetary policy decisions, we need to "translate economic theory into practical policy in difficult economic situations". I am deeply honoured to be awarded an honorary doctorate from the Lund University School of Economics and Management, and I am especially touched that you highlight specifically the ability to translate economic theory into practical policy in your award nomination.

The past few years are an example of translating theory into practice: The Riksbank raised the policy rate sharply in 2022 and 2023 to counteract high inflation. The negative effects came quickly and hit many households and businesses hard. But, only now are we seeing the positive effects in the form of lower inflation, higher real wages and stronger purchasing power. It takes time from when we make a monetary policy decision until it has a positive effect, and during that time, changes take place in the economy. This can make it difficult to see the link between the decision and the outcome.

Economic theory and research is difficult and often technically complex, but it is also rewarding, relevant and exciting. Communication is also difficult but rewarding. Explaining monetary policy decisions when there is great uncertainty about the future is therefore difficult, but also rewarding – and important. Communication is part of the monetary policy toolbox.