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The following OECD assessment and recommendations summarise Chapter 2 of the Economic survey of Sweden published on 14 February 2007.
The strong growth performance over the past years notwithstanding, average inflation has been one of the lowest among European countries since the mid-1990s. This partly reflects positive supply shocks which induced the strong growth in productivity and lower unit labour costs. Global competition and deregulation have led prices in some sectors, such as retailing, to start converging to the lower European levels. With rising trade integration, the share of imports in consumption has increased and a shift towards trade with low-cost producing countries has contributed to low import prices. The Riksbank has responded, in this particular environment, by allowing for a longer time horizon for bringing inflation back to target. That is sensible if indeed the positive supply shocks are temporary, but it will be costly if the rise in productivity growth proves to be lasting and inflation stays below target. Given the persistence of positive productivity surprises and negative inflation surprises, more research is needed to better understand the forces driving inflation and to clarify the role of house prices in the policy decisions. The Riksbank’s plan to share its assessment about the future interest rate path should further improve public understanding and better guide expectations. In the meantime, long-run inflation expectations remain firmly anchored around the central bank’s desired level, demonstrating that monetary policy is highly credible.
Inflation has been below target much of the time
1. CPI excluding interest costs for owner-occupied houses and adjusted for changes in indirect taxes and subsidies.
2. CPI according to definition used before 2005.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded. It contains the OECD assessment and recommendations but not all of the charts included on the above pages.
The complete edition of the Economic survey of Sweden 2007 is available from:
For further information please contact the Sweden Desk at the OECD Economics Department at firstname.lastname@example.org. The OECD Secretariat's report was prepared by Jens Lundsgaard and Felix Huefner under the supervision of Andreas Wörgötter.