We have been able to observe that it is a broad-based decline in inflation, to the extent that all major components are affected.6 Low inflation has come to be a widespread phenomenon and many countries and regions have recently reported inflation rates clearly below their targets. Inflation has fallen particularly sharply in the euro area. The fact that this happens in a situation where there is plenty of spare capacity – which is the case in large parts of the euro area – is not particularly surprising. However, the downturn in Swedish inflation is larger and has been going on for longer than in other countries. And the question is why... One possible reason, which was also discussed in an article in the latest Monetary Policy Report in February, is that Swedish companies have not been passing on their cost increases to consumers as much as is normal.7 They have thus not increased their prices to the extent that one might expect, given the historical relationships with unit labour costs and import prices faced by producers. There may be several reasons for this, but one is that margins may decline when economic activity is weak, which is also noted in the article. Current research using US data implies that price mark-ups vary positively with the business cycle.8 Another reason may be that the weak development in the euro area has hit Swedish exports hard and that this has contributed to resource utilisation being lower than normal over a long period of time.
And to offer a very practical suggestion as to how each of you might be able to do more in your organisations too. Why diversity and inclusion matters The Bank’s approach is to consider all aspects of diversity as part of a broad strategy to deliver an inclusive working environment for all our colleagues. And I can tell you from speaking with senior leaders throughout the City that diversity and inclusion are no longer seen as HR buzzwords, but as critical ingredients to running a successful organisation. A workforce that lacks diversity will never be as effective as it could be. That should be obvious. If we look the same, think the same, and come from the same backgrounds, then we are bound to make the same mistakes. Strangely enough, I have found an analogy to this issue in my day job as the supervisor of UK banks. If a bank has substantial exposures in one sector or geography, it is running significant risk. On the other hand, a bank with a diversified portfolio is less exposed to something going wrong in any one area, and so will likely find itself better positioned, in most states of the world, to weather bad times. Launched in 2011, “The Network of Networks” (TNON) serves as both a forum for sharing best practice and a support community for the leaders of employee networks.