Agency criticizes ‘inflationary’ pay deals

The National Institute of Economic Research (Konjunkturinstitutet) has predicted that the pay increases agreed on in the current round of wage negotiations will lead to higher inflation and an increase in interest rates.

On Thursday evening, Sif, Sweden’s largest White-Collar Union struck a deal with employers guaranteeing members wage increases of just over 10 percent during the next three years.

At lunchtime on Friday, trade union IF Metall agreed to a similar 10.2 percent wage hike for its members.

“If we look at this in isolation, it is going to lead to somewhat higher inflation,” said Mats Dillén, head of the economic research institute.

Dillén is also concerned that the high wage increases will slow down job creation.

“I’m not saying that it threatens to break the positive trend, but it could have gone on longer,” said Dillén.

A number of leading economists, including Jan Häggström from Handelsbanken and Robert Bergqvist from SEB Merchant Banking, agree with Dillén’s analysis.

Both are of the opinion that the Riksbank had not anticipated quite such a high level of wage increases.

“And that may lead to the Riksbank, all else being equal, needing to raise interest rates a bit more to counter increased inflationary pressure,” said Bergqvist.