Sweden's Riksbank Deputy Governor Jansson says stronger inflation-target credibility could allow less forceful rate moves

The Riksbank published a speech by Deputy Governor Per Jansson arguing that Sweden’s inflation-targeting framework has now been tested in both prolonged below-target and above-target inflation episodes, and that the resulting credibility could create scope for monetary policy to respond less forcefully to future deviations from the target. He suggested this could mean tolerating slightly larger and longer short-term deviations from the 2 per cent target, but only if credibility is preserved and closely monitored. Jansson reviewed how the Riksbank used negative policy rates and large-scale securities purchases during the low-inflation period and later delivered the fastest and largest rate hikes of the inflation-targeting era when inflation surged, while long-term inflation expectations remained close to target. He framed any additional flexibility as conditional on continued wage formation anchored to the inflation target, price-setting behaviour not shifting in a way that sustains inflation, and fiscal policy supporting disinflation rather than amplifying inflationary impulses, and called for more debate on firms’ pricing behaviour alongside wage setting. In accompanying material on current monetary policy, he noted the policy rate was cut by 0.25 percentage points to 2.25 per cent in January 2025, the policy-rate forecast essentially stands, and the Riksbank remains prepared to act if the outlook changes amid uncertainties including trade barriers and krona movements.