During the 1970s inflation rates increased rapidly throughout the global economy, mainly because of the oil crisis during the same period of time. However, as the majority of OECD members adopted a restrained monetary policy in the 1980s, the international inflation rate was checked and started to decrease. Since then the inflation rate has been low within the global economy.
However, in Sweden the inflation rate increased rapidly in the late 1980s again. The reasons were a very expansive economic policy financed by large budget deficits and generous wage increases combined with repeated devaluations of the Swedish currency, the krona. In the beginning of the 1990s Sweden faced a severe economic crisis. During this period Sweden changed from a fixed to a floating exchange rate which also had effects on the inflation rate. To curb it Sweden changed its monetary policy to focus more on ensuring price stability. For example, the Swedish government gave the Swedish central bank, the Riksbank, the task to keep the inflation rate at about two percent. As a result of all the work, the inflation rate fell to record low levels.
The change in inflation policy and an increasingly harder international price competition have also contributed to the historically low levels of the inflation rate in both Sweden and in other countries since the beginning of the 1990s. However, because of the financial crisis and the recession which came after the inflation rates have fallen to about zero in many countries around the world. Inflation rates around zero or even negative values are not good for an economy either. Year 2010 shows how the inflation rates are recovering.