Jansson flags inflation risks as Swedish recovery strengthens

Speaking at the National Mediation Office's annual wage formation conference, Jansson described Swedish growth as strong and broad-based, supported partly by unusually expansionary fiscal policy.

Rising leading indicators reinforced his optimism.

Conflicts abroad have constrained supply and raised fuel and electricity prices.

The Middle East conflict and interest-rate differentials with other major economies have also weighed on the krona, which weakened during the year.

Despite a relatively favourable inflation starting point, Jansson said upside risks had warranted slightly faster policy-rate normalisation at September's meeting than June's forecast envisaged.

With that rate path, he projected inflation stabilising at target over time.

Jansson credited balanced wage formation during the high-inflation years with bringing Swedish inflation down faster and more decisively than elsewhere, allowing quicker rate cuts to a lower level.

Food VAT reductions and subsidised public transport now lower inflation but will raise it when they expire.

The Riksbank looks through these temporary effects and normally volatile energy prices.

Jansson warned that prolonged international conflicts increase the risk of higher energy prices entering the underlying inflation process.