Headline CPI went from 1.5 percent annually in  BIS central bankers’ speeches  1  October 2013 to 4.7 percent in May 2014 (figure 1). We expected this rise in inflation to some degree, because it came from a low level and the peso depreciation we have been observing since mid-last year also had an impact. A look into inflation rates over the past six months shows that the biggest increase has concentrated in those components of core inflation of goods and services whose prices are connected – directly or indirectly – to the exchange rate (figure 2). We have also seen an acceleration of nominal wages in recent months. Inflation has behaved thus in a context of sharply decelerating output and demand. In the first quarter this year, output grew 2.6 percent annually, confirming the slowdown that began in the third quarter of 2013. Overall, this outcome was in line with forecasts, but composition shifted towards higher growth in those areas more closely linked to the external sector – like some branches of manufacturing and agriculture – and slower growth in those areas tied to domestic demand, especially services. Leaving out inventories, y-o-y growth in domestic demand picked up from end-of 2013, basically due to a milder drop in investment – especially its machinery & equipment component – and increased dynamism of public expenditure. Domestic spending is still weak, however. Investment has posted negative variation rates for three quarters in a row, while private consumption, mainly of durables, is slowing down (figure 3).
Urban Bäckström: Sweden’s economy is slowing down Speech by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, to the Social Democrats, Härnösand, 20 August 2001. *  *  *  Thank you for the invitation to discuss economic developments in Sweden here in Härnösand. First let me say that conducting monetary policy in the past year has not been exactly easy. The repo rate was raised 0.25 percentage points last December, from 3.75 to 4.0 per cent, and this has been followed by an equally large increase to the present rate of 4.25 per cent. In June, moreover, the Riksbank intervened in the currency market in an endeavour to strengthen the Swedish krona and thereby avert a threat to the 2 per cent inflation target. This evening I shall be attempting to present the Riksbank’s actions as I see them in a wider perspective and convey my view of the challenges we will be facing. Before doing so, however, I want to underscore that a decision by the Riksbank to raise or lower the repo rate does not always appear completely self-evident. In order to avoid an unduly erratic monetary stance, these decisions have to be based on assessments of developments in the period one to two years ahead. The current consensus is that this is approximately the time it takes for an interest rate adjustment to exert its full effect and influence the economy in the desired direction.