Minutes of the Monetary Policy Meeting held on 5 July 2016

At its monetary policy meeting on 5 July, the Executive Board of the Riksbank decided to hold the repo rate unchanged at −0.5 per cent and to continue purchasing government bonds during the second half of the year, according to the plan decided in April. The time of a first increase in the repo rate is postponed somewhat. The rate is not expected to be raised until the second half of 2017, and then at a somewhat slower rate than was previously assessed. A majority of Executive Board members decided to extend the mandate for foreign exchange interventions introduced at the beginning of the year. There is still a high level of preparedness to make monetary policy even more expansionary if this is needed to safeguard the inflation target.

It was noted at the meeting that the Executive Board agreed on the picture of economic prospects and the inflation outlook described in the draft Monetary Policy Report. Uncertainty over economic developments abroad and in Sweden had increased after the United Kingdom EU referendum. It remains the Riksbank’s assessment that the global economy is continuing to improve, but the forecasts for growth abroad and in Sweden have been revised down. International inflation is low and several central banks are expected to conduct a more expansionary monetary policy.

In Sweden, economic activity has strengthened rapidly. Activity is expected to continue to improve and that creates the conditions for inflation to keep on rising. Next year, CPIF inflation is expected to reach 2 per cent.

All in all, the Swedish economy has developed as expected since the monetary policy decision in April although uncertainty has increased. To maintain the rising trend in inflation, good economic growth in Sweden needs to continue. Several central banks abroad are, however, expected to pursue an even more expansionary monetary policy and the inflation forecast is sensitive to various international factors. Against this backdrop, the Executive Board drew the conclusion that monetary policy in Sweden needs to continue to be very expansionary.

The Executive Board agreed unanimously to hold the repo rate unchanged at −0.5 per cent and to continue to purchase government bonds in the second half of 2016 in line with the decision in April.

The increased uncertainty means that the entire Executive Board considers it appropriate to postpone the first repo rate increase somewhat. The rate is not expected to be raised until the second half of 2017, and then at a somewhat slower rate than was previously assessed. Until further notice, maturities and coupons from the portfolio of both nominal and real government bonds will be reinvested.

Against the backdrop of, not least, this increased uncertainty, the Executive Board was also unanimous as regards the importance of having a high level of preparedness to make monetary policy even more expansionary, even between ordinary monetary policy meetings, if this is needed to safeguard confidence in the inflation target. A majority of Executive Board members has therefore decided to extend the mandate for foreign exchange interventions adopted at the beginning of the year.

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