erik thedeen : monetary policy in recent years and key issues ahead speech by mr erik thedeen, governor of the sveriges riksbank, at danske bank, stockholm, 22 november 2024. * * * thank you for the invitation! today, i would like to start by looking back at the past few years – years that have been eventful from a monetary policy perspective, to put it mildly. i shall then go on to discuss the riksbank's latest interest rate decision. finally, i would like to widen my view and discuss the environment in which monetary policy will operate in the long run. several factors behind the rapid rise in inflation the starting point for the rise in inflation was the pandemic in 2020 and the shock to the economy that the spread of infection and the measures to contain it caused. gdp fell sharply and redundancy notices rose to record levels as companies'supply chains broke down and production and consumption stalled. there were also major fluctuations as some consumption first virtually stopped and then rapidly increased again as the economy started to recover. for sweden, this recovery proved to be faster than after other crises. demand was strong not only in the swedish economy but also globally. this contributed to a rapid rise in commodity prices in 2021 and a significant increase in freight prices when global trade adjusted after the pandemic. in addition, various supply shocks also contributed to the rapid rise in inflation. in 2021, energy prices, in particular electricity prices, started to increase rapidly. when russia invaded ukraine in early 2022, inflation received an extra boost as energy and food prices rose even more. after a time, services prices also increased and, by early 2023, more than 8 out of 10 prices in the cpif basket were increasing by more than 4 per cent. thus there was a broad and sharp rise in prices. that firms started to pass on their increased costs to consumer prices to such a large extent was probably a result of the succession of large cost increases and the large pent - up need to consume among households. higher prices may also have become more acceptable – both among firms, who saw that other firms were able to raise their prices more, and among households, who realised that firms were in a vulnerable position after the pandemic. unexpectedly high resilience despite large impact on interest rate sensitiveparts of the economy cpif inflation rose from 4 per cent at the beginning of 2022 to peak at just above 10 per cent in december

, opinion central banks, financial times, 24 october. yellen, janet l. ( 2017a ), transcript of chair yellen ’ s press conference, 20 september. yellen, janet l. ( 2017b ), “ inflation, uncertainty, and monetary policy ”, speech at “ prospects for growth : reassessing the fundamentals ”, 59th annual meeting of the national association for business economics, cleveland, ohio, 26 september. 16 figure 1. swedish inflation ’ ahead of the international cycle ’ annual percentage change note. inflation for sweden is measured as the cpif, for the us as ‘ core pce ’ and for the euro area as the hicp. sources : bureau of labor statistics, u. s. department of labor, european commission ( eurostat ) and statistics sweden 17 figure 2. natural to raise the repo rate 2010 – 2011 purchasing managers ’ index in the manufacturing sector lending to households and companies an index over 50 indicates growth annual percentage change gdp inflation quarterly change in per cent calculated as an annual rate, seasonally - adjusted data. annual percentage change cpif excluding energy cpif cpi - 2 - 2 note. forecasts from april 2011. sources : institute for supply management ( ism ), swedbank, statistics sweden and sveriges riksbank 18 figure 3. troubling situation at turn of year 2014 - 2015 inflation annual percentage change inflation expectations annual percentage change note. measured using the cpif ( left ) and the cpi ( right ). sources : statistics sweden and tns sifo prospera figure 4. 2015 – 2017 – inflation rises towards target again inflation annual percentage change inflation expectations annual percentage change note. measured using the cpif ( left ) and the cpi ( right ). sources : statistics sweden and tns sifo prospera 19 figure 5. the development of services prices indicates that the phillips curve works annual percentage change note. broken lines represent mean values since 2000. source : statistics sweden figure 6. a monetary policy like that in sweden does not have to result in runaway housing prices policy rate in sweden and germany housing prices in sweden and germany germany sweden note. per cent and house price index ( hpi ) respectively, 2005 q1 = 100. sources : ecb, macrobond and federal reserve bank of dallas 20