In a statement released on Friday, the Riksbank’s deputy governor Barbro Wickman-Parak said inflation would continue to drop rapidly over the coming year.
“A large part of the explanation comprises falling energy prices and falling interest expenditure; that is factors that are favourable to growth,” she said, adding that a temporary fall in the inflation rate “should not be confused with a prolonged process with falling prices that affects long-term inflation expectations.”
Wickman-Parak also played down comparisons with the 1930s, arguing that the threat of “deflation” should not be exaggerated.
“Our forecasts, and those of most other experts, indicate that growth will recover in 2010 and that inflation will then increase,” she said.
The Riksbank would continue to analyze the situation and discuss the need for regulatory changes, she said, but the worst of the current crisis was expected to pass in the year ahead.
“We expect the financial crisis to peter out during the course of the year that has just begun,” said Wickman-Parak.