- setting behaviour changed in a similar manner, see bank of canada ( 2024 ), “ analyzing businesses ’ price - setting behaviour ”, box 3, monetary policy report, april. 6 speech from the information on the frequency of price changes. although it is not necessarily a leading indicator, it could still complement other indicators and provide a fuller picture of developments – judging by recent years, it is certainly worth keeping an eye on inflation as prices start to rise more frequently. in general, prices increased by about the same amount as companies ’ costs however, to understand the rise in inflation, we also need to look at how price increases have related to companies ’ costs. in 2022 and 2023, the nier conducted such a study on behalf of the government. 11 the main conclusion of the study is that the cpif rose by roughly the same amount as business sector costs from spring 2019 through spring 2023 – costs that were driven up by rising import prices for commodities and inputs and, to a slightly greater extent, higher labour costs. however, there are major differences in price adjustments between different product groups. smaller price increases than cost increases in some products, notably services, offset the effect of larger price increases than cost increases in other products, notably goods. food prices have been of particular interest and the nier ’ s overall assessment is that consumer food prices increased more than was justified by production costs. however, it is difficult to assess whether any particular part of the food supply chain accounted for the bulk of the price increase. an interesting finding of the study is that changes in, among other things, energy prices and the exchange rate appear to have affected food prices significantly more since 2022 – not only because the changes were larger than before, but also because pricing appears to have reacted more to the changes than it did before. companies in general may also have been somewhat faster in passing on their cost increases to consumers in recent years. stronger link between producer prices and consumer prices the pass - through from cost increases to price increases thus appears to have been greater than before. another sign of this is that the link between producer prices and consumer prices seems to have become stronger. consumer prices are the prices of goods and services consumed by households, while producer prices are the prices at the first sales stage, i. e. the selling prices of goods and services produced by swedish companies and purchased by swedish importers. comparing the evolution of producer prices and overall consumer prices for food and other goods in the 2000s,

turn indicated that monetary policy might have to be given a less expansionary direction in the future. two members of the board even advocated a small repo rate increase in august. the main scenario in the inflation report that is published today does not represent a future development of inflation that threatens price stability. but every inflation forecast contains an element of uncertainty and the risk spectrum also has to be considered when formulating monetary policy. the present report concludes that higher inflation compared with the main scenario is more probable than lower inflation. remember, moreover, that to be most effective, monetary policy has to focus on the situation one to two years ahead. this suggests that the riksbank is moving towards a situation in which the repo rate will be raised. yesterday, however, the executive board decided in favour of an unchanged repo rate. but sooner or later, if developments continue along the lines in the present assessment, a repo rate increase will be called for. if some kind of international shock with a probable downward effect were to occur, or if indications of more subdued economic activity or prices were to be observed, that would naturally be taken into account in our future assessments. why a higher repo rate? a repo rate of 2. 90 % is probably too low over a complete business cycle, even in an economy where inflation expectations have settled down around the targeted rate of 2 %. under such circumstances, the direction of monetary policy can be described as expansionary. this is not countered by a restrictive fiscal policy. in the absence of negative shocks, that normally tends to generate gdp growth above the rate that is sustainable in the longer run. if such a situation is left to continue for too long, various bottleneck problems arise that may push inflation up. such a course of events has to be prevented by the riksbank, which the riksdag ( sweden ’ s parliament ) has made accountable for maintaining price stability. so in order to counter an acceleration of inflation in an upward cyclical phase, sooner or later the level of the repo rate has to be normalised. it is generally true to say that a repo rate increase should not be postponed unduly. if a central bank waits too long, the increase has to be larger in order to arrest the overheating and inflationary tendencies. that would run the risk of the next slowdown being deeper and more severe than otherwise. a higher repo rate does not necessarily impede the continuation of a favourable economic trend