Riksbank deputy open to scrapping CPI as target variable
Quirks of Swedish CPI make it awkward for use as monetary policy target variable
Sweden should consider targeting a new measure of inflation, as the country's unusual approach to measuring CPI risks undermining trust in Sveriges Riksbank, deputy governor Per Jansson said today (December 3).
Unlike most other countries, CPI in Sweden includes the interest payments made by home owners with mortgages. This means a cut in interest rates puts immediate downward pressure on inflation, and prices will only move in the expected direction over a longer horizon, Jansson said.
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