(Bloomberg) — Sweden’s Riksbank will probably have to run a tight monetary policy for a “fairly long time,” even as price increases are showing signs of slowing down, Deputy Governor Martin Floden said.
(Bloomberg) — Sweden’s Riksbank will probably have to run a tight monetary policy for a “fairly long time,” even as price increases are showing signs of slowing down, Deputy Governor Martin Floden said.
“Inflation is heading in the right direction, but there is still a long way to go,” Floden said in a speech hosted by DNB ASA in Stockholm.
The comments follow data showing that Sweden’s economy contracted last quarter by more than anticpated, reviving prospects of a hard landing for the Nordic country. The central bank, which also has to weigh risks of further turbulence in the battered property sector, is still widely expected to raise its benchmark rate another quarter-point in September, to 4%.
“While it is true that the average price level has risen slowly in recent months, this is due to the fall in energy prices,” Floden said. “Prices of other subcategories behind average inflation are still rising too quickly.”
At the same time, the Swedish krona has hit all-time lows against the euro in recent months, complicating the Riksbank’s fight against inflation as it makes imported goods more expensive. Floden said the weak krona is a “worrying factor” that risks contributing to continued high inflationary pressures.
–With assistance from Christopher Jungstedt.
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