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MINUTES: Skingsley: Price rises have become broader since February

RIKSBANK
  • "My main reason for supporting the changeover is that inflation has not just risen to a historically high level but has also become surprisingly broad... since the February meeting, we have noted that price rises are broader, that inflation under the new forecast has not yet peaked, and that inflation expectations are rising."
  • "Even if the upturn in inflation can largely be attributed to supply shocks, which monetary policy can normally choose to disregard if inflation expectations are sufficiently well-anchored, the force of the upturn in inflation is now so strong that the role of the inflation target as anchor in price- and wage-setting may start to weaken. This is why I see reason to act today."
  • "Another reason for acting today and not waiting is that the growing debts of the household sector have become more sensitive to interest rate developments than in previous rate-hike cycles. So working gradually with monetary policy and evaluating the effects will not just restrain the development of prices for goods and services, which is a long-term benefit for all economic agents, it will also reduce the risk that the Riksbank will have to take stronger action at a later date, if inflation expectations become too high and trigger a price and wage spiral."
  • "The current path indicates a pace of interest-rate hikes similar to the ones in November 1999 and September 2001. It is considerably more cautious than the phase of rate hikes lasting from 2006 until September 2008 and slightly more cautious than the hikes lasting from July 2010 until July 2011. My conclusion is that today’s turnaround, although unexpected by many, is quite moderate in comparison"
  • "The Riksbank can hinder price rises from turning into a general price and wage spiral from which everybody will lose. By gradual rate hikes, we are now strengthening the possibilities for better economic development in the longer perspective."

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