Riksbank's Seim highlights vigilance against inflation risks
Riksbank Deputy Governor Anna Seim expressed concern over the risks of higher inflation, stating that the current policy rate of 1.75 percent provides a solid foundation for future adjustments. She delivered her remarks at ABG Sundal Collier on Thursday.
Vigilance in a turbulent global economy
Deputy Governor Anna Seim highlighted her considerable concern that inflation will prove too high, rather than too low, citing the ongoing war in the Middle East and its potential to drive up energy prices and disrupt production networks.
Despite these risks, the Riksbank's Executive Board opted to maintain the policy rate at 1.75 percent.
Seim explained this decision was based on three factors: underlying inflationary pressures aligning with the target, the existence of scenarios that could warrant a lower policy rate, and the current 'massive noise' obscuring reliable economic signals.
She emphasized that the 1.75 percent rate, described as 'slightly expansionary but close-to-neutral,' serves as a robust starting point for future monetary policy adjustments once clearer signals emerge.
The krona's volatile journey
Seim also addressed the development of the krona, reiterating the challenge of predicting its short-term movements, though long-term trends can be understood retrospectively.
She observed that the krona often depreciates during periods of uncertainty, though exceptions exist, such as its strengthening last year despite high uncertainty, followed by a recent weakening partly due to war concerns.
Seim stressed the increasing importance of financial flows in exchange rate dynamics, advocating for an integrated analysis of traditional macroeconomic data and capital flows to comprehend the krona's drivers.
She concluded by noting the krona's critical impact on inflation and economic activity, necessitating the Riksbank's close monitoring and continuous analytical work.