Inflation and the Great Moderation’, Geneva Reports on the World Economy 19. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  Business cycles can be first amplified and then imperilled by growing imbalances in the real economy, such as over-investment in capital and housing, debt-fuelled consumption, or, particularly in emerging economies, excess current account imbalances that can lead to sudden stops.7 And imbalances can manifest themselves in rising inflation. In those advanced economies closest to full employment like the US and the UK, wage pressures have picked up as slack has been absorbed. A similar pattern is observable in the euro area (Chart 5). In the UK, private sector wage growth has increased from around 1% five years ago, to 2% 3 years ago; 2½% last year to 3 ½ % today as unemployment has fallen below its natural rate.
Digitalisation driving development The rapid decline in the use of cash in Sweden is part of a broad digitalisation trend that affects society as a whole. Technological advances have given us, for instance, new more efficient payment solutions such as real-time payments with the Swish mobile application, which is used for transactions that used to be mostly cash-based. Similarly, mobile phones can function as card terminals, which gives small business owners increased opportunity to accept cards. Swedish banks also have a tradition of cooperating with one another when innovative payment solutions are introduced on the market. In this way, they can make better use of network effects and more quickly attain a critical mass of users. Moreover, Sweden has a highly-educated population that is willing to adopt innovations in the IT field. Technological advances that lead to more efficient payments, cooperation between producers of services who make it possible to fully utilise the network effects, changed consumption patterns and a technology-friendly population are a powerful combination when it comes to creating changes in payment habits! In an international perspective, Sweden and the other Nordic countries are way ahead in this change process. However, the trend is global – an increasing number of people want to use digital solutions to pay and fewer want to use paper-based payments, including banknotes and coins. In particular, the younger generations are quick to adopt digital technology. It is probably therefore only a question of time before more countries find themselves in the same situation as we have in Sweden today.