Central banks around the world are stumped as to why inflation is low and wage growth slow despite the fall in unemployment after the financial crisis. Federal Reserve chair Janet Yellen has even described the phenomenon as a “mystery”.
Sweden’s Riksbank, in particular, has failed to pay heed to one important explanation for the phenomenon, namely the outsourcing of high-skilled services to low-cost countries, claims Lena Hagman, chief economist at employer organisation Almega.
She believes Sweden’s central bank will be forced to delay the planned rise in interest rates and revise down its growth and wage forecasts, saying: “The Riksbank argues that the problem of finding staff will lead to an accelerated wage drift in the affected sectors, as we have been used to in previous economic booms. But that is no longer the case”.