Jansson urges vigilance despite low inflation
Riksbank Deputy Governor Per Jansson emphasized the need for vigilance against potential adverse scenarios, despite Sweden's current low inflation providing a good starting point. Speaking at DNB Carnegie in Stockholm, Jansson discussed the economic situation and the Executive Board's recent policy-rate decision.
Global supply shocks loom
Deputy Governor Per Jansson highlighted the ongoing challenge for all monetary policy makers in assessing the far-reaching effects of supply disruptions stemming from the war in the Middle East.
He expressed a cautious optimism that the impact might be relatively limited, particularly for Sweden.
Jansson noted that, unlike the high-inflation period of 2021–2023, Sweden now benefits from significantly weaker economic demand.
This reduced demand, coupled with generally higher policy rates across most countries compared to the start of the previous high-inflation years, provides a more favorable backdrop.
Furthermore, Sweden's current inflation is distinctly weaker, with few indicators suggesting an imminent significant upturn.
This combination of factors offers a more robust foundation for navigating potential external shocks, allowing for a more measured policy response.
A cautious wait-and-see
Despite the current advantageous conditions, Jansson cautioned against complacency, noting that the risk of a more serious inflation scenario has increased over the spring.
He warned that in an adverse turn of events, the prevailing favorable inflationary environment could rapidly dissipate, potentially necessitating a tightening of monetary policy.
However, Jansson stressed that the ultimate trajectory remains uncertain, indicating that the 'jury is still out' on whether such a scenario will materialize.
This uncertainty underpinned his decision at the Riksbank's most recent monetary policy meeting to advocate for a wait-and-see approach, resulting in the policy rate being held unchanged at 1.75 percent.
This stance balances heightened risks with current disinflationary momentum.
Vigilance, not alarmism
Jansson's speech effectively balances cautious optimism with a clear warning about emerging inflation risks.
While Sweden's current economic backdrop is more favorable, global supply chain vulnerabilities are a legitimate concern for central bankers.
His 'wait-and-see' approach is pragmatic, allowing the Riksbank flexibility without committing to premature tightening or signaling an all-clear.