Why has Swedish inflation been persistently low?

Average inflation in Sweden has been one of the lowest among European countries since the mid-
1990s. Three supply-side factors help to explain this phenomenon, all related in some sense to increased
global integration. First, a shift towards imports from low-cost producing countries has resulted in falling
import prices. Second, deregulation and increased product market competition with foreign companies
entering the market has led to price falls in some sectors, notably in retailing. Third, wage growth has
lagged productivity and kept unit labour costs down. This paper reviews these factors and analyzes the
policy options for the central bank.

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