MNI INTERVIEW: Covid Shifts Raise Price Doubts-Riksbank Deputy

Uncertainty over the accuracy of Sweden's inflation measures could persist for years due to changes in consumption patterns during the Covid pandemic, and policymakers must analyse data carefully as some evidence suggests its impact will not only be disinflationary, Riksbank Deputy Governor Henry Ohlsson told MNI.

"If the changes in the consumption pattern … are permanent it is really important to think about the production of price statistics because then there will be a need … as quickly as possible to try and assign new weights when producing these statistics," he said.

"To determine what has happened we also need to know the consumption patterns, we need to know the budget shares of different goods and services," Ohlsson said, noting that statistics gatherers would need to look at ways of accelerating data collection on spending patterns if the behavior changes endure.

Sweden kept its economy largely open throughout the pandemic but that did not prevent big shifts in behaviour and spending, some of which may make it easier for businesses to raise some prices to consumers.

In the meantime, Ohlsson said the question was whether producers have "reduced their prices because of the lower activity or have they increased their prices to compensate for the lower demand?"

"You have two possibilities here and I guess we will have to wait a while to see what is really going on. We have anecdotal evidence of both types of reaction."

Inflation on the Riksbank's target CPIF measure, consumer prices with a fixed interest rate, fell to 0.5% in July from 0.7% in June, but these headline numbers are based on weights for consumer spending patterns from two years ago.

PRE-COVID CONCERNS

Even in pre-Covid times Ohlsson said there was uncertainty about the inflation data, which the Riksbank tried to take into account. But now that uncertainty has intensified.

"The inflation numbers we get are always uncertain. This year the uncertainty is bigger than before (but) you should always interpret these numbers with care and more care this year than previous years," he said.