Jansson: Confidence in the inflation target determines how flexible monetary policy can be
Speech "The challenges we have faced during my time on the Executive Board have been very diverse. First a long period of inflation below target, then a period of inflation high above it. What these periods have had in common, however, is that monetary policy has reacted clearly and decisively to bring inflation back to the target.” This is how Deputy Governor Per Jansson began his speech at Handelsbanken in Stockholm today.
Date: 13/02/2025 08:00
Speaker: Deputy Governor Per Jansson
Place: Handelsbanken, Stockholm
Mr Jansson believes that there may be some advantages in the fact that inflation targeting has now been tested and has proved it passes the test, both during a period of too low inflation and during a period when inflation has been too high. "The investment in creating credibility that we have made could pay off in the form of monetary policy being able to act a little less forcefully in the future than it has done so far with interest rates," said Mr Jansson.
However, he emphasised that a prerequisite for this is that economic actors genuinely see the target as credible and worth defending, and that they act accordingly. The more people who help to emphasise the importance of having an inflation anchor in the economy in the debate and in actual economic decisions, the more relaxed the attitude of monetary policy towards short-term deviations from the inflation target can be.
“For my part, I am prepared to try such an approach. But it will need to be empirical, with the effects on credibility very closely monitored. Let's see if we are ready to take such a step,” concluded Mr Jansson.