CPI and underlying inflation 1997 Annual average, per cent CP I  U N D 1X  U N D IN H X  4  3  1 .7 2  1 .4 0 .9  1  0 1997  UND1X = CPI excluding interest expenditure, taxes and subsidies UNDINHX = UND1X excluding goods that are mainly imported  3  BIS Review 61/1999  4. CPI and underlying inflation 1998 Annual average, per cent CPI  U N D 1X  U N D IN H X  4  3  1 .8 2  1 .0 0 .4  1  0 1 998  UND1X = CPI excluding interest expenditure, taxes and subsidies UNDINHX = UND1X excluding goods that are mainly imported  5. CPI and underlying inflation 4 3  UNDINHX 2  UND1X  1 0  CPI -1 1995  1996  Average impact on CPI  Annual rate for  1997  1996 •Interest rate fall -0,6p.p. •Tax changes -0,6p.p. 0,8 / 2,2 / 2,9  1998  1997 •Interest rate fall -0,9 p.p. •Tax changes +0,6 pe  0,9 / 1,4 / 1,7  CPI/ UND1X/ UNDINHX  BIS Review 61/1999  1999  4  1998 •Interest rate fall -0,6p.p. •Tax changes +0,2p.p. •Coffee, petrol -0,1 p.p.
Mr Bäckström covers monetary policy in Sweden from 1996 to 1998 Opening remarks by Mr Urban Bäckström, Governor of Sveriges Riksbank, the Swedish central bank, before the Standing Committee on Finance in Stockholm on 18 May 1999. Introduction In the period 1996–98 the annual rates of inflation, measured with the CPI, were 0.8, 0.9 and 0.4 per cent, respectively. This means that in each of these years the change in the CPI not only deviated from monetary policy’s 2 per cent target for price stability but was also outside the lower tolerance limit of 1 per cent inflation. The Riksbank has indeed made assessments that subsequently proved to be a bit off the mark. As a result we have also made decisions that, looking back when the outcome was known, could have been somewhat different. But on the whole, the result of monetary policy in this period seems to be acceptable. In my opening remarks I intend to give this appraisal more substance. One major reason why CPI inflation has been low in the past three years is that the price trend has been affected by some specific price movements that monetary policy neither can nor should aim to counter fully. If the Riksbank attempts to counter such price movements, the result might be unnecessarily costly for the economy, that is, exaggerated fluctuations in economic activity as well as in the financial markets. It was against this background that the new Executive Board of the Riksbank clarified the inflation target earlier this spring.