Anna Breman: From 500 per cent to −0.5 per cent to − what is next?

Speech by Ms Anna Breman, Deputy Governor of the Sveriges Riksbank, at a panel discussion at the Sveriges Riksbank, Stockholm, 31 August 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

On the afternoon of 16 September 1992, my teacher Conny came into our class and exclaimed: "The Riksbank has raised its policy rate to 500 per cent". I said spontaneously "no" – I did not believe him. I studied the science programme at upper secondary school and thought I was good at maths, and an interest rate of 500% was something no one could pay. I started to contradict him. But the teacher insisted he was right - and so he was. The Riksbank had raised its policy rate to 500 per cent in an attempt to defend the fixed exchange rate. This sparked an interest that led me to study Economics at university a few years later.

The so-called 1990s crisis fundamentally changed Sweden. It led to a series of reforms that we are still living with today: the inflation target, the fiscal policy framework and the Industrial Agreement.

At present, the economic policy framework, and not least the inflation target, is being put to the test. Recently, a number of global shocks − the coronavirus pandemic, Russia's invasion of Ukraine1 and lock-downs in China − have contributed to pushing up inflation in Sweden and around the world, to levels we have not seen since the early 1990s. I think it is of the utmost importance that we defend the inflation target as anchor for price setting and wage formation in Sweden.