Minutes of the Monetary Policy Meeting held on 30 June 2021

At the monetary policy meeting on 30 June, the Executive Board of the Riksbank decided to hold the repo rate unchanged at zero per cent and it is expected to remain at this level over the coming three-year period. The Executive Board also decided that during the fourth quarter the Riksbank will buy bonds for an aggregate nominal amount of SEK 68.5 billion. This means that the pace of purchasing will continue to be tapered but that the envelope for asset purchases of SEK 700 billion will be fully utilised up until the end of 2021.

The pandemic’s grip on the global economy has eased during the spring and early summer, and the recovery is well under way. More and more people have been vaccinated against COVID-19, the spread of infection has decreased and restrictions have begun to be phased out. But the members stressed that the pandemic is not over yet. The recovery is proceeding at a different pace in different parts of the world and there are new variants of the virus that are causing uncertainty with the risk of setbacks.

The members noted that the economic outlook and inflation prospects look brighter. At the same time, they pointed out that inflation is being affected by large variations in energy prices as well as measurement problems and other effects that are deemed to be temporary. It is expected to take some time before inflation is close to 2 per cent more persistently. Several members noted that inflation is expected to be somewhat above the inflation target at the end of the forecast period, but considered that this is not an argument for making monetary policy less expansionary at present. They stressed the importance of anchored inflation expectations in line with the inflation target and bearing in mind that inflation on average has undershot the target for quite some time, inflation temporarily above 2 per cent could contribute to this.

Several members pointed out that weaker inflation prospects than those currently in the forecast may lead to monetary policy becoming more expansionary, for example in the form of a rate cut. This applies in particular if confidence in the inflation target were to be under threat. But, if inflation were to risk overshooting the target substantially and persistently, a less expansionary monetary policy could be justified during the forecast period. A few members discussed a rate path that could indicate a rate rise at the end of the forecast period.

All members agreed that monetary policy needs to be sustained in order for inflation to be persistently close to 2 per cent, and supported the decision to keep the repo rate unchanged and the forecast implying an unchanged repo rate until the third quarter of 2024.

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