Minutes of the monetary policy meeting held on 27 October 2014

At the monetary policy meeting on 27 October, the Executive Board of the Riksbank decided to cut the repo rate to zero per cent and to adjust the repo-rate path downwards.

It was noted at the meeting that the Executive Board agreed on the picture of economic prospects and the inflation outlook described in the draft Monetary Policy Report.

The prospects for the United States and the United Kingdom remain good. However, inflation abroad is expected to become lower and the recovery in the euro area is expected to proceed more slowly than was previously assessed.

In Sweden, economic activity is strengthening and the labour market is continuing to improve. Nevertheless, inflation is low and inflationary pressures are expected to be lower than was previously forecast.

The Executive Board was therefore unanimous in the view that monetary policy needs to be even more expansionary for inflation to rise and attain the target and for inflation expectations to remain anchored at 2 per cent.

All of the Board members advocated that the repo rate be cut to zero and that the repo-rate path should be lowered substantially. The low repo rate will increase demand in the economy, which will contribute to a rise in inflation. CPIF inflation is expected to reach 2 per cent during the first half of 2016. As noted in the draft Monetary Policy Report, monetary policy may need to be adjusted if conditions change. Moreover, the Riksbank will have the same possibilities as other central banks to take further measures to increase the monetary policy stimulus.

But the low repo rate will also contribute to reinforcing the trend of rising house prices and household indebtedness. This risks leading to problems for both individual households and the economy as a whole. When interest rates are this low, several Board members emphasised that it is even more important that other policy areas now handle these risks.

During the meeting the Board also discussed the role of supply factors when analysing the development of inflation, as well as the role of the repo-rate path in the light of the current uncertainty over economic and monetary policy developments around the world. 

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The Riksbank is Sweden's central bank and an authority under the Riksdag, the Swedish parliament. The Riksbank is responsible for monetary policy with the objective to maintain price stability. The bank has also been given the task to promote a safe and efficient payment system.