Deflation Trap Tests Riksbank’s Resolve in Fighting Bubbles
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How does a central bank tackle consumer price deflation and a potential credit-driven asset bubble at the same time?
That’s the challenge facing policy makers at Sweden’s central bank, which is planning to raise interest rates next year even as the price gauge it targets drops below zero. According to the Riksbank’s former head of monetary policy analysis, the bank needs to rethink its stance on inflation.