Sweden's largest trade union confederation LO has announced it will not demand extra wage compensation even if prices soar due to energy price shocks from the Iran war. LO's chief economist Torbjörn Hållö made the statement in hopes of convincing Sweden's central bank, Riksbanken, to moderate future interest rate hikes.
"The risk of a price-wage spiral in Sweden is near zero," Hållö said, according to multiple Swedish media reports. He argued that Sweden's policy interest rate does not need to be raised as much as in other countries if prices begin to surge upward due to the energy price shock.
The risk of a price-wage spiral in Sweden is near zero
Hållö assessed that Riksbanken could avoid one or two interest rate hikes compared to the European Central Bank (ECB). This assessment is based largely on the fact that Swedish labor market parties base their wage negotiations on Riksbanken's inflation target of two percent, even as prices for food, rents, interest rates, gasoline and other items rise at significantly higher rates.
The statement comes amid concerns about potential inflation spikes following energy market disruptions related to the Iran conflict. Hållö's comments represent an attempt to preemptively address inflation concerns and potentially influence monetary policy decisions.
He argued that Sweden's policy interest rate does not need to be raised as much as in other countries if prices begin to surge upward due to the energy price shock
Hållö assessed that Riksbanken could avoid one or two interest rate hikes compared to the European Central Bank (ECB)