Minutes of the Monetary Policy Meeting held on 23 October 2019

At the Monetary Policy Meeting on 23 October 2019, the Executive Board of the Riksbank decided to leave the repo rate unchanged at –0.25 per cent. As in September, the forecast for the repo rate indicates that the rate will most probably be raised in December to zero per cent. However, low interest rates abroad and continued uncertainty over global and Swedish economic activity mean that the forecast for the repo rate has thereafter been revised downwards and indicates that the repo rate will be unchanged for a prolonged period after the expected rise in December.

The board members supported the picture of the economic outlook and inflation prospects described in the draft Monetary Policy Report. In Sweden and abroad, the economy has entered a phase of lower growth, something which has been in the Riksbank’s forecasts for some time. Overall, new information since September points to economic activity slowing more rapidly than expected. However, several members emphasised that the slowdown implies a normalisation of an economic situation that has been strong for many years with high growth and favourable development on the labour market. Even though the forecasts have been revised downwards, they are not giving a picture of recession, either abroad or in Sweden.

Inflation has been close to the inflation target of 2 per cent for some time. In recent months, inflation has fallen in line with the Riksbank’s forecast, but is expected to rise in the period ahead. The members noted that resource utilisation is expected to be close to normal levels going forward while inflation prospects overall are unchanged for the year ahead. This suggests maintaining the previously communicated monetary policy in the near term. It means that the repo rate is now being left unchanged at –0.25 per cent and that it will most probably be raised to zero per cent at the monetary policy meeting in December.

The members emphasised that there is still uncertainty over the economic outlook and inflation prospects, both in Sweden and abroad. In combination with a weaker economic picture and continued low interest rates globally, it is therefore the Executive Board’s view that it is difficult to say when it will be appropriate to raise the interest rate again after the expected increase in December. The overall picture suggests proceeding more cautiously with monetary policy. The members thought that it was therefore reasonable to lower the forecast for the repo rate going forward. The repo rate is now expected to be unchanged at zero per cent for a prolonged period.

All the members supported both the decision to hold the repo rate unchanged at –0.25 per cent and the forecast for the repo rate. However, one member expressed hesitation about increasing the rate at the turn of the year and argued for the increase to take place some way into the forecast period.

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