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Challenges about inflation and the economy in the United States

The Bank of Sweden (Riksbank) highlighted some challenges in the link between inflation and the economy in the United States.

First of all, the annual inflation rate in that nation increased 5.4% last September, from 5.3% in August, which represented a 13-year high.

So the inflation and economy focus have raised concerns.

In general, for Sweden‘s central bank, if the recovery is out of sync, imbalances can emerge, especially in countries with substantial foreign currency borrowing.

So a related uncertainty factor is the evolution of inflation, especially in the United States.

If inflationary pressures were much stronger than expected, US interest rates could rise rapidly and therefore cause problems for both the United States and other countries.

The Bank of Sweden concludes that the direct economic consequences for Sweden of such a development would probably be small, but it cannot be ruled out that the problems may spread through the financial markets and thus have relatively important consequences for the Swedish economy as well.

There are also factors that could lead the global economy to develop more strongly than in the Riksbank’s main stage.

Inflation and the economy

From the perspective of this Swedish bank, a greater easing of economic policy cannot be ruled out, especially in the United States, where there is still considerable uncertainty about the expansionary of fiscal policy.

Inflation has been higher than expected in recent months and the Riksbank has made major upward revisions to its forecasts for next year.

This illustrates the uncertainty about inflationary pressures both in Sweden and abroad.

Demand is growing rapidly and many companies are now struggling to meet it.

It is difficult to obtain some intermediate goods, in the transport sector there are logistical problems and indicators point to a shortage of labor in certain industries.

 

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