Minutes of the Monetary Policy Meeting held on 21 September 2020
At the Monetary Policy Meeting on 21 September, the Executive Board of the Riksbank decided to hold the repo rate unchanged at zero per cent. The Riksbank’s zero policy rate and extensive programme of measures are providing continued support to economic developments and helping inflation rise towards the target.
The coronavirus pandemic has dominated developments in the global economy over the past six months. In the first acute phase in the spring, many countries were hit by sharp falls in GDP, rising unemployment and turmoil on financial markets. The members noted that the measures taken by governments and central banks around the world have helped to calm the markets, mitigate the economic decline and start the recovery. But they also emphasised that the pandemic is not yet over. The way back is long and fraught with uncertainty, not least as regards the long-term effects of the crisis, and the economic recovery is dependent on extensive economic policy support.
The members pointed out that the Riksbank’s measures during the pandemic have had the intended effects. Credit supply has been maintained and interest rates for households and companies have been kept low, despite the widespread crisis. By safeguarding this, monetary policy is helping to mitigate the effects of the crisis and provide the conditions for economic recovery. This will ultimately lead to inflation rising towards the target. The members therefore considered it appropriate to continue to purchase assets, offer liquidity in all the programmes launched so far this year and hold the repo rate unchanged at zero per cent.
If there is a need for more monetary policy stimulus, further expansion of the balance sheet remains an important tool. Several members pointed out that the scope for cutting the policy rate is limited but that such a measure cannot be ruled out. Which measures would be most effective depends on the situation and what happens in other policy areas, not least fiscal policy.
Recent inflation outcomes have been higher than expected, but the statistics are currently difficult to interpret and developments going forward are uncertain. The assessment is that it will take time before inflation returns more permanently to the target. Several members stated that if inflation were to overshoot the target for a while, this need not be a reason to make monetary policy less expansionary.
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