##l put to the test in a situation where inflation significantly overshoots the target for the first time since its introduction in 1995. too high inflation and great uncertainty about developments we have a year behind us in which inflation rose sharply around the world and central banks raised policy rates at a rapid pace. at the beginning of 2022, inflation was around 4 per cent in sweden. the riksbank and most forecasters assessed that inflation would fall during the year. as we know, it continued to rise instead. one reason was the rapid economic recovery from the coronavirus crisis, which pushed up prices on commodities, inputs and transport. household demand was high, while it was difficult for businesses to adjust and increase production quickly enough. as a result, inflation received an unexpected boost when economies opened up. another important reason was russia's invasion of ukraine, which drove up the prices of energy and grain, as well as other agricultural products. in addition, the high energy prices had indirect effects on inflation via, for instance, rising prices for transports and other input goods for companies. in the context of high demand following the pandemic, firms found it easier to pass on their increased costs to consumer prices than might have been expected from previous experience. one year later, at the beginning of 2023, we thus had both far too high inflation and the lesson from last year that it is very difficult to know how inflation will develop. there are many indications that inflation in sweden, as well as abroad, will fall back in 2023. the uncertainty instead concerns how much and how quickly it will fall and whether this will be sufficient. the swedish economy must not end up in a situation where inflation becomes entrenched above the target of 2 per cent. the danger of inflation becoming entrenched at a high level let me elaborate on why this is so important, starting with an illustrative example from when i visited companies last month. one person i spoke to noted that there had been a clear shift in negotiations with other companies about future prices and deliveries. a few years ago, inflation was not discussed in these negotiations. but now it is, and this makes it difficult to enter into long - term business relationships, which in turn has a negative impact on economic developments. this highlights the problem that high inflation becomes a factor that makes financial decisions more difficult for companies and households. and this contributes to the entrenchment of high inflation. we must return to low and stable inflation because this is a

for the riksbank's monetary policy framework. after that i would like to give my view on inflation, the economic situation and monetary policy and also go into more detail on why it is so important that inflation comes all the way down and stays close to the riksbank's target of 2 per cent. this may not be obvious to everyone – after all, it has been thirty years since we were last in a similar situation. 1 / 10 bis - central bankers'speeches same inflation figures as in the early 1990s, but a different situation when i had just left the stockholm school of economics and started working at the riksbank in 1990, inflation in sweden was around 10 per cent. now when i returned to the bank at the start of this year, the inflation figures were at the same level. the background to, and reasons for, the high inflation now and then differ, of course. but the important thing is that the conditions for rectifying the situation are much better now. looking at economic developments on average over the past thirty years or so, we have had low inflation combined with good economic growth, real wages have increased steadily – with one exception last year – and we have also had, and still have, stable public finances. one important reason for this is the reforms of wage formation and the economic policy frameworks that sweden implemented in the mid - 1990s to address pricewage spirals, cost crises and an economic policy that was unable to stabilise developments. the inflation target and the transition to an independent central bank with a strong mandate to maintain that target were part of this. since then, the inflation target and a monetary policy that independently steers towards this target have been a cornerstone of economic policy in sweden. this is also reflected in the new sveriges riksbank act, which applies from the start of this year. the inflation target is the overriding objective of monetary policy. as before, the new act states that price stability is the primary objective of the riksbank. it is now also stated more clearly that price stability means sustained low and stable inflation. in concrete terms, the inflation target is the same as before, that is, a target of 2 per cent for inflation measured as the annual change in the cpi with a fixed interest rate, the cpif. if the riksbank wishes to change the specification of the target at some point in the future, the riksdag must approve the new specification before it can