Price developments for sub-groups behind the CPI measures show a similar picture (see Figure 3).4,5 Over the past two years, goods prices have fallen somewhat faster than normal. Prices of services have increased more slowly since the beginning of last year. This  3  See Figure A1 in the appendix. Trim85 is a measure that excludes the prices that have varied most and least. UND24 is a measure that weighs together the prices included in the CPI in a different way – the prices that have varied the most in historical terms are given the lowest weighting, and vice versa. 4  Please note that there has not been time to update the figures I show here with the inflation outcome for April published by Statistics Sweden yesterday. CPI inflation then rose to 0 per cent, that is, prices in April were unchanged in relation to April 2013. 5  Normally, one divides the CPI into prices of energy, foods, goods (excluding energy and foods), services and interest expenditure. One reason for this particular division is that energy and food prices met by consumers are to a large degree influenced by developments in commodity prices on the global market. It may thus be interesting to study the sub-groups separately. The component in the CPI that measures interest expenditures is also special, as it is affected by the Riksbank’s changes in the repo rate.
But the problem with prices falling is often said to be that demand will then collapse as households are postponing consumption while waiting for prices to fall so they can buy more cheaply.19 This reasoning is not necessarily wrong, but is really only a reformulation of the problem I mentioned above; that low inflation limits the scope for making monetary policy more expansionary. There is a risk that households will postpone their consumption – that is, that they will increase their saving – if the real interest rate becomes unjustifiably high. Here it is necessary to put price developments in relation to developments in wages and the return on saving. There is therefore scarcely reason to believe that anything dramatic will begin to happen just as the general rate of inflation becomes negative. One should also remember that substantial differences are hidden in the price trends for different product groups that lie behind the general rate of inflation. One example is developments in prices for technology-intensive goods such as TVs, computers and mobile  15  According to Drehmann et al. (2012), an average financial cycle, in which the credit cycle is a central element, is 16 years long. The length of an average business cycle is much shorter, perhaps five years. 16  Inflation expectations have fallen in recent years in the surveys conducted by the National Institute of Economic Research and Prospera. Short-term expectations are now just below one per cent, but long-term expectations are still close to the two per cent inflation target.