Minutes of the Monetary Policy Meeting held on 5 September 2018

At the Monetary Policy Meeting on 5 September 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 indicates that it will also be held unchanged at the monetary policy meeting in October, and then raised by 0.25 percentage points, either in December or February.

A majority of the Executive Board supported the picture of the economic outlook and inflation prospects described in the draft Monetary Policy Report. Global economic activity continues to be favourable and the Swedish economy has developed strongly for some time. Inflation is close to the target of 2 per cent. In the longer term, the forecasts are unchanged in principle. Several members emphasised the uncertainty over international developments, among other things due to signs of increasing trade barriers.

Inflation is close to 2 per cent largely because of rapidly rising energy prices. Different measures of underlying inflation indicate that inflationary pressures are still moderate. Several members raised the question of what this will mean for the development of inflation later on, when the contribution from energy prices tails off. It was noted that a necessary condition for inflation to remain close to 2 per cent is for monetary policy to continue to be expansionary.

Against this backdrop, a majority of the Executive Board considered it appropriate to leave the repo rate unchanged now. At the same time, it was emphasised that the conditions are good for inflationary pressures to rise: economic activity remains strong in Sweden and abroad and inflation expectations are close to 2 per cent. If the economy develops as expected, there will therefore soon be scope to slowly reduce the support from monetary policy. The repo rate path indicates that the rate will also be held unchanged at the monetary policy meeting in October and then raised either in December or February. The Executive Board was clear about the appropriateness of rate rises being made in increments of 0.25 percentage points when they do happen. It was emphasised how important it is to proceed cautiously when support from monetary policy is reduced. A couple of members reminded the meeting about the structural problems on the Swedish housing market and the risks that this entails to economic development in Sweden.

Martin Flodén entered a reservation against the repo rate path. He advocated a repo rate path indicating the likelihood that the repo rate will be raised by 0.25 percentage points at the monetary policy meeting in October, but which coincides with the repo rate path in the draft Monetary Policy Report as from the third quarter of 2019. He felt that the communication of such a repo rate path would entail sufficient tightening of monetary policy today. Henry Ohlsson 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.

Press office tel. 46 8 787 0200