Minutes of the Executive Board’s monetary policy meeting on 6 September 2011

At the Monetary Policy Meeting on 6 September, the Executive Board of the Riksbank resolved to leave the repo rate unchanged at 2 per cent and to postpone continued increases somewhat. This decision was taken against the background of the slowdown in the Swedish economy, which is now expected to be more pronounced than was forecast in July. This, in turn, is due to the increased concern over public finances abroad and the deterioration of global growth prospects.  The Executive Board also considered that a lower repo-rate path would gradually stabilise inflation around the target of 2 per cent and resource utilisation around a normal level.

However, there is presently considerable uncertainty over economic developments. This means that the repo-rate path may need to be revised in the period ahead. On one hand, the possibility that the problems abroad could be greater than anticipated and could thus have more tangibly negative effects on the Swedish economy cannot be ruled out. This could increase the need for more expansionary monetary policy. On the other hand, the financial unrest may subside sooner than expected, and the slowdown in the economy may be less prolonged. This would reduce the need for more expansionary monetary policy.

The conclusions of the monetary policy discussion are that the poorer growth prospects abroad are contributing to the Swedish economy slowing down more than was forecast earlier. Both households and companies are acting with greater caution and the labour market is improving at a slower rate. Inflationary pressures are low, and resource utilisation is assessed to be slightly lower than normal. However, Sweden’s GDP growth is expected to increase next year. For this to happen, it is necessary that decisions be taken on fiscal policy consolidation measures abroad and that confidence returns among households and companies.

Deputy Governor Karolina Ekholm and Deputy Governor Lars E.O. Svensson supported the decision to hold the repo rate unchanged at 2 per cent, but entered a reservation against the repo-rate path in the Monetary Policy Update.


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