Riksbank Deputy Governor Ohlsson makes case for further tightening, sees policy rate going a couple of percentage points higher
The Riksbank needs to push ahead with rate hikes in order to keep inflation expectations around target and it may need to lift the policy rate above 2%, Deputy Governor Henry Ohlsson said Tuesday. In a speech at Uppsala University Ohlsson said "As I see it now, the repo rate needs to be a couple of percentage points higher in a few years’ time."
The Riksbank's Executive Board hiked the repo rate (policy rate from early June) from zero to 0.25% in April and published a collective rate path showing the rate just below 2% at the end of the three-year forecast period, but Ohlsson's comments indicate it may have to rise above 2%. He said that just because "inflation expectations are close to the target, the Riksbank cannot refrain from conducting an active monetary policy to make sure that it is attained."
Ohlsson added that historically inflation has tended to rise in periods of war and that higher prices accompanying the Ukraine conflict is following this pattern.