Minutes of the Monetary Policy Meeting held on 30 June 2020

At the monetary policy meeting on 30 June, the Executive Board of the Riksbank decided on further monetary policy measures to alleviate the economic consequences of the pandemic and help the economy and inflation to recover. The framework for the asset purchases the Riksbank has been making since the beginning of the crisis is increased from SEK 300 billion to SEK 500 billion and the programme is extended to the end of June 2021. In September, the Riksbank will also begin purchasing corporate bonds. The Executive Board has further decided to cut interest rates and extend maturities on the lending to the banks. The repo rate was held unchanged at zero per cent.

The members of the Executive Board observed at the meeting that the pandemic has severely negative consequences for the global economy. This year, Swedish GDP is expected to fall as much as it did during the financial crisis, at the same time as unemployment is rising and inflation is below the target. Although there are signs of the beginning of a recovery in several areas, the members emphasised that the uncertainty over future developments is still very large. They pointed to the risks of setbacks and long-term negative effects of the pandemic on the economy, and emphasised that the extensive measures taken by governments and central banks around the world are important for the continuing recovery.

The members thought that the various measures taken by the Riksbank and other central banks have helped hold interest rates low and keep up lending to households and companies, despite the historically rapid and profound slowdown in the economy. But they also stressed that the situation is still fragile. The members therefore agreed that further monetary policy measures should be taken to continue keep interest rates low and promoting credit supply and thereby give support to the economic recovery and inflation.The importance of maintaining confidence in the inflation target was emphasised.

All of the Executive Board members supported the package of measures presented in the draft Monetary Policy Report and in annexes B, C and D to the minutes. The measures include extending the framework for the asset purchases from SEK 300 billion to SEK 500 billion up to the end of June 2021, initiating purchases of corporate bonds in September, cutting interest rates and extending maturities for lending to the banks and holding the repo rate unchanged at zero per cent.

The members discussed why these measures are currently judged to be more effective and appropriate than a cut in the repo rate. At the same time, they did not rule out the possibility of a future cut if this is judged appropriate to support inflation and secure confidence in the inflation target.

The members further pointed to the important role played by fiscal policy in the management of the crisis and pointed out that there is good scope for powerful fiscal policy measures.

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