Minutes of Monetary Policy Meeting held on 28 April

At its monetary policy on 28 April, the Executive Board of the Riksbank decided to purchase government bonds for a further SEK 40-50 billion. In addition, the repo-rate path was lowered significantly compared with the decision in February. The repo rate was left unchanged at −0.25 per cent but may be cut further. Slow increases in the repo rate are not expected to begin until the second half of 2016. These measures and the readiness to do more underline that the Riksbank is safeguarding the role of the inflation target as a nominal anchor for price setting and wage formation.

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.

Global economic activity is gradually improving. Although there is still considerable uncertainty over economic developments abroad, the recovery in the euro area appears to be on firmer ground.

The expansionary monetary policy is considered to have a positive effect on the Swedish economy. CPIF inflation has begun to rise and in recent months has become somewhat higher than was forecast by the Riksbank. GDP growth during the fourth quarter of 2014 was also higher than expected.

In an environment where monetary policy abroad is out of step, it is difficult to assess exchange rate developments. The krona has weakened substantially, which supports inflation. If the krona were to appreciate rapidly or international developments were poorer than expected, there is a risk that the rise in inflation would come to a halt.

The Executive Board was unanimous that a more expansionary monetary policy is required to ensure that inflation rises towards the target sufficiently quickly. Inflation is expected to reach 2 per cent at the turn of the year 2015-2016.

All of the members of the Executive Board advocated extending the purchases of government bonds by SEK 40-50 billion during the period May to the end of September, holding the repo rate unchanged at -0.25 per cent and revising the repo-rate path down substantially in relation to the decision in February.

Inflation has been low for a long time and the Riksbank's monetary policy reflects the fact that there is very limited tolerance for low inflation. There is thus still a high level of preparedness to make monetary policy even more expansionary if this should prove necessary, also between the ordinary monetary policy meetings; for instance, by cutting the repo rate further, buying more government bonds, beginning to lend money to companies via the banks, or intervening on the foreign exchange market.

Several Executive Board members expressed concern over the risks linked to a very expansionary monetary policy. These are coupled, for instance, to household indebtedness and the rapid rise in housing prices. The Board members pointed out that it is now urgent that the Government and other authorities implement measures to reduce these risks. In this context, they emphasised the importance of clarifying Finansinspektionen's mandate and tools and investigating the conditions for an amortisation requirement as soon as possible. They also pointed out that rapid price increases on high-risk financial assets also require increased vigilance in the period ahead.