Minutes of the Monetary Policy Meeting held on 14 February 2017

At the monetary policy meeting on 14 February, the Executive Board of the Riksbank decided to hold the repo rate at −0.50 per cent and there is still a greater probability that the rate will be cut than that it will be raised in the near term. The purchases of government bonds will continue for the first six months of 2017, as was decided in December. The Executive Board has also taken a decision to extend the mandate that facilitates a quick intervention on the foreign exchange market.

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

Since the last monetary policy meeting in December, outcomes and indicators have confirmed the Riksbank’s view of an economic recovery abroad and strong economic activity in Sweden, and the revisions in the forecasts are largely minor. At the same time, political uncertainty is considerable in many parts of the world and the risks of setbacks have increased.

It is pleasing that economic activity is strong in Sweden and that inflation expectations are now back in line with the inflation target. CPIF inflation in December was also close to 2 per cent, but it is important to point out that the recent upturn has been mostly driven by temporary factors. It is the assessment of the Executive Board members that it will not be until the end of 2018 before inflation stabilises around 2 per cent.

Inflation has been low for a long time and continued strong economic activity and a krona that does not appreciate too rapidly are required for inflation to sustain itself on a level close to the inflation target. Political uncertainty abroad, which can ultimately have a negative impact on the development of Swedish economic activity and inflation, also underlines the need for monetary policy to remain expansionary.

All members deemed it appropriate to hold the repo rate at −0.50 per cent. Opinions differ slightly in the Executive Board as to the exact formulation of the repo rate path but all the members support the repo rate forecast. This forecast reflects the fact that there is still a greater probability that the rate will be cut than that it will be raised in the near future, and that slow increases will not begin until the start of 2018.

Moreover, a majority of members considered it appropriate to extend the mandate facilitating rapid intervention on the foreign exchange market, against the backdrop of the major uncertainty that prevails regarding the development of the krona exchange rate and the consequences it may have for inflation. One member did not support this proposal.

Purchases of government bonds will continue according to the plan adopted in December.

Aspects of the risks associated with the growing household indebtedness were also discussed at the meeting. The Executive Board is in agreement that these risks need to be managed using targeted measures in housing policy, tax policy and macroprudential policy.

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