Minutes of the Monetary Policy Meeting held on 25 April 2018

At the Monetary Policy Meeting on 25 April 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 has been revised down since the monetary policy meeting in February and indicates that slow increases in the repo rate will not be initiated until towards the end of the year.

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 February. Economic activity abroad continues to strengthen, but inflation is rising moderately. In Sweden, the economic situation is strong and inflation has been close to the target over the past year.

One of the reasons why CPIF inflation is close to 2 per cent is a rapid increase in energy prices. Underlying inflation has been unexpectedly weak so far this year and, as at the February meeting, the forecast for inflation measured in terms of the CPIF excluding energy has been adjusted downwards. Several members expressed concern about the development of inflation going forward and it was noted that a prerequisite for CPIF inflation to stabilise close to 2 per cent is that monetary policy remains expansionary. It has taken a long time to bring inflation and inflation expectations back to 2 per cent and several members stressed the importance of vigilance and caution in monetary policy. In light of the uncertainty surrounding the strength of inflationary pressures, the majority concluded that it is reasonable to now wait slightly longer before it is time to start raising the repo rate than according to the assessment made at the monetary policy meeting in February. The forecast for the repo rate indicates that rate rises will be initiated towards the end of the year.

Slight differences of opinion were expressed as regards when it might be appropriate to raise the repo rate. One member did not wish to rule out the possibility of it happening in September while another thought that it may be necessary to further postpone the first increase, compared with the forecast for the repo rate.

The members discussed the development of the exchange rate; what might be behind the large movements that have occurred since the last meeting and in what way this is expected to affect inflation. Several members pointed out that it is important that the krona exchange rate develops in a manner compatible with inflation stabilising close to the target.

Several members also underlined the importance of inflation expectations continuing to be in line with the inflation target.

There was also a discussion about distributional effects and whether monetary policy can and should take redistribution policy into consideration.

One member entered a reservation against the decision to hold the repo rate unchanged and against the repo rate path in the draft Monetary Policy Report. He advocated raising the repo rate to −0.25 per cent with reference to the strong economic growth in Sweden and abroad.

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