Minutes of the monetary policy meeting held on 11 February 2015
At the monetary policy meeting on 11 February, the Executive Board of the Riksbank decided to cut the repo rate to –0.10 per cent and to adjust the repo-rate path downwards somewhat. At the same time, the interest rates on the fine-tuning transactions in the Riksbank's operational framework for the implementation of monetary policy are being restored to the repo rate +/–0.10 percentage points. The Riksbank will also buy government bonds for SEK 10 billion. These measures and the readiness to do more at short notice underline that the Riksbank is safeguarding the role of the inflation target as a nominal anchor for price setting and wage formation.
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.
The global economy is expected to continue recovering. But the uncertainty over economic developments abroad and the volatility on the financial markets has increased since the monetary policy meeting in December. The low oil prices are positive for global GDP growth but also lead to low global inflation. Apart from the movements in oil prices, the increased uncertainty is also partly due to recent developments in economic-policy conditions in Greece and the conflict between Russia and Ukraine. The economic outlook differs from country to country and region to region. This is reflected in increasing differences in monetary policy. The central banks in the United States and the United Kingdom are expected to raise their policy rates this year, while the ECB and several other central banks have made monetary policy more expansionary. These differences have contributed to substantial fluctuations on the foreign-exchange markets.
An economic recovery abroad will reinforce economic activity in Sweden and the labour market will improve going forward. Inflation is still low, but there are signs that underlying inflation has bottomed out. However, lower oil prices risk dampening inflation expectations and thereby inflation more than was assumed in the forecast. To this can be added the increased uncertainty about developments abroad and on the financial markets.
The Executive Board agreed that monetary policy needs to be even more expansionary to reduce the risk of long-term inflation expectations continuing to fall and to support inflation rising towards the target sufficiently fast.
All of the Board members advocated that the repo rate should be cut by 0.10 percentage points to –0.10 per cent, that the repo-rate path should be adjusted downwards and that the interest rates on the fine-tuning transactions in the Riksbank's operational framework for the implementation of monetary policy should be restored to the repo rate +/–0.10 percentage points.
A majority of the Board members also decided that the Riksbank shall buy nominal government bonds for SEK 10 billion. One member entered a reservation against the decision to buy government bonds now.
If these measures were to prove insufficient to get inflation to rise towards the target, the Riksbank can quickly make monetary policy even more expansionary. The measures taken and the readiness to do more underline the Riksbank's aim to safeguard the role of the inflation target as a nominal anchor for price setting and wage formation.
The Board also discussed at the meeting the effects of a negative repo rate, the matching problems on the labour market, the effects of structural changes in the economy and the risks of increased household indebtedness and the need for further measures to deal with this.
Read the full Minutes of the Monetary Policy Meeting (PDF).