Our assessment was that there is a need to continue to raise the repo rate in order to stabilise inflation at a level close to the inflation target of 2 per cent and to avoid too high a level of resource utilisation in the future (see Figure 11). However, as usual, we would like to add that uncertainty concerning the future is great and the interest rate path we have calculated is a forecast, not a promise. Wage formation will probably continue to work well in the years ahead The conditions are good for wage formation to continue to work well in the years ahead, just as it has since the mid-1990s. This is also the assumption made in the Riksbank’s forecasts from April. The rapid improvement of the labour market means that the central agreements concluded in the autumn and next year are expected to reach higher levels than the agreements concluded last year. Wage increases over and above the central agreements (“wage drift”) are also expected to contribute towards slightly faster wage increases. The Riksbank’s assessment is that overall hourly wages will increase by about 3.5 per cent per year in 2012–2013, which is compatible with a CPIF inflation rate (inflation excluding interest rate changes) of close to 2 per cent at the end of the forecast period.3 But all forecasts are uncertain. This also applies to wage forecasts. It is normally easier to make good forecasts for the development of wages than it is for inflation.
Inflation expectations and the conduct of monetary policy, Speech at an event organised by the SAFE Policy center, 11 july 2019  6  Figure 3. Recent divergence between the evolution of household inflation expectations and market based-measures  Sources: ECB, European Commission  7