Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Sweden Needs Inflation Overshoot as Jobs Lost, Svensson Says

Jan. 16 (Bloomberg) -- Swedish central bank Deputy Governor Lars E. O. Svensson said policy needs to be set to allow inflation to overshoot the target as high unemployment risks becoming permanent in the largest Nordic economy.

The Riksbank’s repo rate should “at least come down to a level of 0.5 percent to begin with, then we will have to see if that will be enough or not,” Svensson told reporters today in Stockholm. “Experience shows that the krona would be a bit weaker and that export companies would manage better.”

Svensson last month argued for a deeper cut than the 0.25 percentage point move to 1 percent that the Riksbank delivered. The former Princeton University professor entered reservations against all rate decisions last year, saying a more expansionary policy will move inflation closer to the 2 percent target.

The krona was little changed at 8.6501 against the euro at 1:16 p.m. in Stockholm after having strengthened 2.3 percent om the past 12 months.

“If the krona is strong, all else equal, that’s yet another reason to lower the rate” even as inflation and unemployment are the most important arguments for further cuts, Svensson said. “It’s obvious that the economy would manage better in this very difficult, weak economy with a lower rate and a weaker krona.”

Sweden’s seasonally adjusted unemployment rose to 8.1 percent in November, from 7.7 percent the previous month, the Stockholm-based statistics office said last month. Sweden’s annual inflation rate was a minus 0.1 percent in December.

“When unemployment has been high over a long period of time and is becoming entrenched, we need a particularly expansionary monetary policy, a large demand for labor and an inflation rate that is temporarily allowed to overshoot the target,” Svensson said in a speech published today on the Riksbank’s website.

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.