Per Jansson: Credibility and flexibility going forward

Speech by Mr Per Jansson, Deputy Governor of the Sveriges Riksbank, at Handelsbanken, Stockholm, 13 February 2025.

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

Accompanying slides to the speech

My time as a member of the Executive Board of the Riksbank has been quite special, with two extreme periods in terms of how inflation has developed. The first period had already started before I joined the Executive Board in 2012. During this time, inflation had been below target more or less consistently for more than half a decade, sometimes very much below. The problem, which we shared with many other central banks, was how to get inflation to rise towards the target. After a few years of better target attainment in 2017−2019, the global pandemic hit and was followed by a period in which inflation rose sharply and was far above the target, for the first time since its introduction some thirty years ago (see Figure 1). In other words, the problems we have had to deal with during this time have been of very different kinds.

What these periods have had in common, however, is that monetary policy has reacted clearly and decisively to bring inflation back to the target. This has required quite specific, and in some cases unique, measures. First, negative policy rates and large-scale securities purchases, something that had not been tried before. After that, the fastest and largest rate hikes during the inflation targeting period.

I believe there may be some merit in the fact that inflation targeting has now been tested both during a period of too low inflation and during a period of too high inflation − and of course that it has proved to pass the test. The investment in credibility that we have thus made could pay off in the form of making it slightly easier to conduct monetary policy in the future. More specifically, it could mean that we can allow ourselves to act a little less forcefully than we have done so far with the interest rate. But a prerequisite for this is that economic actors really see the target as credible and worth upholding, and act accordingly. This is what I intend to talk about here today.