Minutes of the Monetary Policy Meeting held on 23 October 2018
At the Monetary Policy Meeting on 23 October 2018, the Executive Board of the Riksbank decided to hold the repo rate at −0.50 per cent. The forecast for the repo rate is unchanged since the monetary policy meeting in September and indicates that the repo rate will be raised by 0.25 percentage points either in December or February.
A majority of the Executive Board supported the picture of the economic outlook and inflation prospects described in the draft Monetary Policy Report. This picture has remained largely unchanged since September. The global economy continues to develop positively and economic activity in Sweden remains strong. CPIF inflation and inflation expectations are close to or slightly above 2 per cent.
Several members emphasised the uncertainty factors around developments abroad and that these can also have significant negative consequence for the Swedish economy in a bad scenario. Examples highlighted were the risks linked with escalated trade conflicts between the United States and the rest of the world, uncertainty over the long-term stability of the Italian public finances and the effects of the United Kingdom’s exit from the EU.
Inflation in Sweden is slightly over 2 per cent largely because of rapidly rising energy prices. Different measures of underlying inflation are lower but there are signs that inflationary pressures are rising. Several members pointed out that the conditions are good for inflation staying close to target even when the rate of increase in energy prices slows.
Against this backdrop, a majority of the Executive Board considered it appropriate to leave the repo rate unchanged now. If the economy develops in a way that continues to support the outlook for inflation, it will also be, according to the Executive Board, appropriate to soon start raising the repo rate at a slow pace, either in December or February. The majority was not more specific about the timing but emphasised that developments going forward and how they affect the economic outlook and inflation prospects will determine when it is appropriate to raise the repo rate.
Several members stressed the importance of monetary policy being adjusted based on the prospects for inflation. The steps towards higher rate levels must be taken with caution so that inflation can continue to remain stable around the target in the years ahead. A few members also reminded the meeting about the risks on the Swedish housing market and indebtedness among Swedish households.
Deputy Governors Martin Flodén and Henry Ohlsson entered reservations against the decision to hold the repo rate unchanged and advocated raising the repo rate to −0.25 per cent. Mr Flodén referred to the upturn in inflation and the strengthened confidence in the inflation target and advocated a repo-rate path that coincides with the path in the report as from the third quarter of 2019. Mr Ohlsson referred to the strong economic development in Sweden and abroad and advocated bringing forward the repo-rate path with the same gradient as the repo-rate path in the Monetary Policy Report.
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