Linköping, May 15, 2023 – Vice Riksbank Chief Aino Bunge stated today that while the decrease in inflation is welcome, there is still a long way to go before reaching the target of 2 percent. She made these remarks during a speech discussing the latest monetary policy decisions of the Riksbank at the Östsvenska Handelskammaren in Linköping.
In her address, Bunge emphasized that high inflation has economic consequences for society as a whole, but it particularly impacts those with already narrow margins. She highlighted the importance of a significant decline in inflation this year, emphasizing that low and stable inflation is essential for a strong economic development and real wage increases for Swedish workers.
Bunge pointed out that the household sector entered the phase of interest rate hikes with high savings, which allowed them to sustain their consumption. However, as interest rate increases have a more pronounced effect, it becomes inevitable for many households to reduce their consumption, as evident in the current statistics. Inflation and rising interest costs also affect the housing market, leading to a decline in housing investments. Nonetheless, Bunge highlighted the continued strength of the labor market.
The pressure on costs in earlier stages of production has eased, and companies’ price plans have moderated from previously high levels, indicating a further decline in inflation. However, the speed at which this occurs remains uncertain. Bunge stressed the need for a tight monetary policy to ensure a decline in and stabilization of inflation at the inflation target.
“Inflation decreased in April, and that is both welcome and positive. For example, we observed a decline in food prices in April. However, we must remember that inflation is still high, and we have a long way to go to reach our target. Ahead of our next monetary policy decision at the end of June, we will evaluate this and other information that can influence the economic and inflation outlooks. We will assess what is an appropriate monetary policy to bring inflation back to target within a reasonable time,” said Bunge.