Since May of last year, the Riksbank has raised the key interest rate in rounds to deal with the high inflation, something that has been met with sharp criticism from several quarters. But Robert Boije, chief economist at SBAB, understands the actions and believes that we will soon see the effect of the increases. – Towards the autumn, we will see significantly lower inflation in Sweden, he says. At present, Sweden’s inflation is well above the target of two percent. That the Riksbank has time and again chosen to raise the policy rate is not particularly surprising, says Robert Boije, and emphasizes that the Riksbank is in a tricky situation. – It is a very difficult balancing act for the Riksbank right now, he says. Not as effective monetary policy The Riksbank can quite easily adjust the interest rate to influence demand in the Swedish economy, but the situation Sweden finds itself in now is different, says Boije. – We have a lot of imported inflation due to what is happening in the outside world, and this has rubbed off on the inflationary pressure in Sweden, where monetary policy is not quite as effective, he says. – But it is still the case that you have to raise the interest rate to get a handle on inflation – even in this situation. Further increase Robert Boije believes that we will see further interest rate increases in the future. At the same time, it is important for the Riksbank to remember the delay effect, he believes. – The effect of the interest rate changes the Riksbank has already made may not yet be visible on inflation because monetary policy often operates with a significant delay. There is a risk of raising the interest rate a little too much and not waiting for this effect. He understands the interest rate increases, but believes that inflation will be lower as autumn approaches. “Interest rate increases are inflationary in themselves” Michael Grahn, chief economist at Danske Bank, also understands that the Riksbank has raised the key interest rate several times, but at the same time points out that it has driven inflation. – The discussion that I have tried to bring up is about being aware that the Riksbank’s interest rate increases are actually inflationary in themselves and that the effectiveness of monetary policy may not be as strong as you think, he says. – You take two steps forward by tightening for households, but at the same time you take one back because you speed up inflation in large parts. In the player above: Hear Robert Boije talk about what happens if the Riksbank chooses not to raise the policy rate
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