Europe Economy

‘Inflation has been too low for many years’: Riksbank Governor

‘Inflation has been too low for many years’: Riksbank

Inflation may be edging higher in Sweden; however the country's central bank still expects inflation levels to remain below its target of 2 percent for a while longer, its governor has explained to CNBC.

"(Despite Tuesday's data) we do expect inflation to be a bit lower going forward, so we are slowly getting there," Stefan Ingves, governor of the Riksbank, told CNBC Wednesday.

"On the other hand, inflation has been too low for many years, so it's not quite over yet, before we feel that we are on safe ground."

On Tuesday, Sweden's headline inflation rate hit a five year-high in February according to the Financial Times, supported by an uptick in energy prices. The year-on-year inflation rate rose to 1.8 percent and consumer prices rose 0.7 percent in February from the previous month.

According to Statistics Sweden (SCB) the underlying inflation rate in February came in at 2.0 percent, compared to January's figure of 1.6 percent.

With the Swedish central bank having an inflation target of 2 percent, Ingves welcomed the recent data.

Riksbank: Very important to keep track of what’s going on worldwide

However, when asked about sustainable inflation levels and envisioning monetary policy to be less accommodative, Ingves said he expected inflation to hover around 1.5 percent for a year or so, due to a possible decline in energy prices.

"Inflation expectations in Sweden are actually up and they are getting to or are already at 2 percent – so that's an important signal for us."

"On the other hand, the 2 percent inflation that was recorded yesterday is very much a consequence of energy prices and if energy prices are likely to fall back a bit, and that means that we expect inflation – let's say for a year, year and a half – to kind of hobble around let's say 1.5 or something like that."

"So we would really like to see inflation at 2 percent for a sustainable period, before we can say that this almost-10 year very difficult period is completely over."

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