Jansson: Riksbank not predicting any wage shocks
"The Riksbank is not predicting any shocks in the forthcoming wage bargaining round. What we see ahead is normal wage development that does not jeopardise Sweden's competitiveness." These are the words of Deputy Governor Per Jansson as he delivers a presentation at the Swedish Trade Union Confederation (LO) today.
Sweden has had stable wage formation since the 1990s when the Industrial Agreement was concluded and the inflation target was created. It is true that inflation has sometimes deviated from the 2-percent mark but the target has nevertheless worked well as a common starting-point for the social partners in their wage negotiations. Mr Jansson points out that this in itself has benefited general economic development in Sweden. It has, for example, contributed to greater purchasing power and more stable wage formation. Major fluctuations in prices and wages make it more difficult for all participants and create socioeconomic costs. A level playing field and predictability instead reduce uncertainty and create stability in the economy.
In recent years, however, inflation has been too low. The Riksbank has therefore adopted forceful measures to bring inflation closer to target. The repo rate has been significantly cut and currently stands at – 0.35 per cent. Large volumes of Swedish government bonds are also being purchased. These measures have helped to push inflation up significantly since last year. It is important that inflation continues to rise and becomes established at a level around 2 per cent. A development of this kind contributes towards inflation expectations that are compatible with the inflation target and the stable development of the Swedish labour market.
"We expect economic activity, productivity and inflation to develop normally in the years ahead. This suggests that wages will increase in line with a historical average of 3.2–3.5 per cent," Mr Jansson concludes.
