Minutes of the Monetary Policy Meeting held on 25 October 2017

At the Monetary Policy Meeting on 25 October 2017, the Executive Board of the Riksbank decided to hold the repo rate unchanged at −0.50 per cent. The first rate increase is expected to be made in the middle of 2018, which is the same assessment as made at the meeting in September. The purchases of government bonds will continue during the second half of 2017, as decided by the Executive Board in April. As the present asset purchase programme will run for the remainder of the year, it will provide an opportunity to await further information that could affect a decision in December to possibly extend the purchases. The Executive Board has also decided to extend the mandate that facilitates a quick intervention on the foreign exchange market.

The Executive Board agreed on the picture of economic development and the inflation outlook described in the draft Monetary Policy Report. It was noted that developments since September have been in line with the Riksbank’s earlier assessment and that there have not been any decisive changes in the forecasts.

Global inflationary pressures are subdued and the normalisation of monetary policy abroad is expected to take time. In Sweden, economic activity is strong. CPIF inflation has risen and, like inflation expectations, is close to 2 per cent. However, part of the recent upturn in inflation is explained by temporary factors and inflation is therefore expected to fall back somewhat in the coming months.

All of the members noted that a continued expansionary monetary policy was needed for inflation to remain close to 2 per cent going forward. The Executive Board agreed to hold the repo rate unchanged at −0.50 per cent and no member entered a reservation against the forecast for the repo-rate path. Purchases of government bonds will continue for the remainder of the year in accordance with the previous decision. There were slight differences of opinion among the Board members as to whether the purchases of government bonds should be extended beyond this. However, they agreed that there is time to await further information that may be important for a decision on a possible extension at the December meeting. Several members emphasised the importance of the exchange rate for the economic outlook and inflation prospects, and that, in this context, it is important to take into account that the Riksbank’s monetary policy does not deviate too far from that in other countries.

Several members discussed the developments on the Swedish housing market. It is a welcome development that housing investment has increased and price rises are slowing down. However, there are risks associated with this development. If new construction is based on incorrect assessments of the type of housing in demand and on overly optimistic forecasts of continued price rises, there could be problems further ahead. As housing prices have risen, household debt has increased and the financial system has become more vulnerable. The Board members emphasised, as on many previous occasions, the need for a combination of measures in several different policy areas to attain long-term sustainable development.

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