“Forecasting errors reveal Swedish Riksbank’s fall from grace,” Bloomberg, March 8, 2015.
Sweden’s central bank has gone from best to worst among its peers at forecasting inflation.
The errors can be traced back to 2010. That’s when policy makers, led by Governor Stefan Ingves, started raising rates in the middle of Europe’s worst economic crisis since WWII. Ingves said at the time the Riksbank was fighting the risk of an overheated housing market.
According to [Jesper] Hansson at the National Institute of Economic Research, the reason for the big forecast misses could be that Riksbank forecasters have tended to produce views that please the board. NIER’s latest prediction shows inflation, excluding mortgage costs, will average below 2 percent until 2019. The Riksbank estimates it will reach the target already next year.
“It’s a bit easier to present results that top management wants,” Hansson said.