I still expect the persistently upbeat labour market conditions and strong wage growth to gradually strengthen the underlying price pressures in the euro area. Some observers are already calling for a very slow and hesitant normalisation of monetary policy, for fear that higher interest rates might cause corporate sector debt servicing to balloon and thus dangerously curtail investment activity.
The Swedish economy is holding its ground, but is also seeing lower growth. The international organisations all predict that the world economy will pick up only gradually in 2013, and growth estimates have generally been adjusted downwards, particularly for the euro area. Although the USA seems to be faring a little better, its unsustainable budget deficit presents serious challenges.