As I have previously stated, against the background of the drawn-out recovery and the weak labour market, we at the Riksbank expect a wage increase rate for 2010–2012 of approximately 2.5 per cent per year, lower at the start and higher towards the end of the period. This is a very low rate of increase, historically. Our forecast will no doubt be considered to be too high by many on the employer side and, likewise, too low for many on the union side. The wage development we expect is consistent with an underlying inflation rate reaching 2 per cent by the end of the forecast period. All other factors being equal, higher wage increases in this situation tend to lead to higher inflation, higher interest rates and a weaker development of production and employment. Similarly, lower wage increases tend to lead to lower inflation, an ability to maintain low interest rates for a longer period of time and a stronger development of production and employment. 6  BIS Review 11/2010  One factor that will undoubtedly play a major role in the approaching rounds of wage bargaining is the division of the Swedish economy. The differences in the ability of various industries and companies to bear a certain rate of wage increases are currently unusually great. The development of wages along similar lines in different parts of the economy would lead to smaller pay differences, but also to a faster transformation of the economy.
Svante Öberg: The financial crisis and wage formation Speech by Mr Svante Öberg, First Deputy Governor of the Sveriges Riksbank, at the National Mediation Office, Stockholm, 29 January 2010. * * * Why is the Riksbank interested in wage formation? Wage formation and monetary policy are interrelated. The development of wages affects inflation and inflation affects the development of wages. The target for monetary policy is to maintain a low and stable level of inflation. This job is made easier if wage formation works well. Consequently, it is important for the Riksbank to follow this year’s comprehensive wage bargaining rounds. I will not make any recommendations to the social partners regarding the outcome of this year’s collective bargaining. Instead, I will describe the economic setting for this collective bargaining. This may seem to be an extremely subtle distinction, but it is an important one, nevertheless. We make no normative pronouncements regarding which rate of wage increase may be most appropriate. However, considering the drawn-out recovery and the weak labour market, the scope for wage increases seems to be highly restricted. I would also like to make two points during this introduction. Firstly: I will not be reporting any new view of economic developments beyond that presented in the monetary policy update of 16 December, although a few figures will be updated with the latest statistics. Secondly: The assessments and valuations I make here are not necessarily shared by all of my colleagues on the Executive Board of the Riksbank.