Minutes of the Monetary Policy Meeting held on 13 February 2018

At the Monetary Policy Meeting on 13 February 2018, the Executive Board of the Riksbank decided to hold the repo rate unchanged at –0.50 per cent. The forecast for the repo rate is unchanged since December and indicates that slow repo rate rises are set to be initiated during the second half of this year. Reinvestments of redemptions and coupon payments in the government bond portfolio will continue until further notice.

A majority of the Executive Board supported the picture of the economic outlook and inflation prospects described in the draft Monetary Policy Report. Economic activity abroad continues to strengthen and in Sweden, growth is high, the labour market is strong and inflation is close to the target of 2 per cent.

But the inflation forecast has been revised down slightly for the year ahead as a result of weaker-than-expected inflationary pressures and wages developments. It was noted that a necessary condition for inflation to stabilise close to 2 per cent is that monetary policy remains expansionary.

Several members expressed concern over the development of inflation in the period ahead and emphasised that downside risks need particularly close attention when determining the appropriate timing and speed at which to initiate rate rises. The importance of monetary policy proceeding cautiously was emphasised in light of the length of time it has taken to bring inflation and inflation expectations back to 2 per cent. It was noted that the relationship between monetary policy in Sweden and abroad plays a central role as it influences the development of the exchange rate and hence the economic outlook and inflation prospects in Sweden. Developments in the housing market also continue to be important to follow.

Several members also pointed out the importance of inflation expectations continuing to be in line with the inflation target. Confidence in the inflation target has strengthened, but there is a risk that it has still not been completely restored after the earlier long period of low inflation. If inflation expectations were once again to fall, it would make it more difficult for the Riksbank to stabilise inflation going forward.

One member entered a reservation against the decision to hold the repo rate unchanged and against the repo-rate path in the Monetary Policy Report. He advocated an increase in the repo rate to –0.25 per cent, referring to the strong economic development in Sweden and internationally and that inflation and inflation expectations have been close to 2 per cent for some time.

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