When global economic activity improves, global export prices are expected to rise. Initially, the krona is expected to strengthen somewhat in trade-weighted terms, which will dampen the impact on Swedish import prices in the near term. However, from the beginning of next year, we assess that the krona will no longer contribute to holding down import prices and they will then rise faster. As economic activity in Sweden strengthens, the rate of wage increase will also rise. At the same time, we have assessed that labour productivity is increasing, which means that unit labour costs will continue to grow by around 2 per cent a year in the coming years. The fact that import prices rise faster, at the same time as unit labour costs continue to increase at a normal rate, will lead to companies’ total marginal costs gradually beginning to grow at a more normal pace. We also predicted in July that the demand situation would improve during the forecast period, partly thanks to higher demand from abroad and a continued expansionary monetary policy in Sweden. We are expecting that it will become easier for companies to raise their prices when demand increases. Companies’ profit shares will also increase towards more normal levels then. All in all, these factors – increasing unit labour costs, rising import prices and higher price mark-ups – lead to the assumption that inflation will rise in the coming period.
Such a rise in prices cannot and may not be corrected with monetary policy measures as long as no wage-price spiral is set in motion. First, we do not know whether this price rise is a permanent or merely a temporary phenomenon. Second, the change in oil prices impacts directly on the price level, whereas monetary policy changes act only indirectly and after a considerable time lag. Third, higher oil prices constitute a cost shock that cannot be countered by means of monetary policy. Experience shows that a monetary policy which attempts to counteract the effects of a one-off increase in oil prices on the price level can cause considerable damage to the national economy. Furthermore, it must be noted that the present price increase is modest in a historical comparison. For example, during the second oil price shock at the end of the 1970s, oil cost approximately twice as much as today calculated at current prices. Our interest rate decision of today is thus not aimed at combating the effects of the oil price rise on inflation. The increase in oil prices nevertheless casts a shadow over the prospects for the economy, which are optimistic overall. We are not of the opinion, however, that the upswing is threatened by this. Model calculations have shown that higher oil prices would slow growth in Switzerland only moderately.