Minutes of the Monetary Policy Meeting held on 10 February

At its monetary policy meeting on 10 February, the Executive Board of the Riksbank decided to lower the repo rate by 0.15 percentage points to ¬−0.50 per cent. A first increase in the repo rate is expected in the middle of 2017. The Board also decided until further notice to reinvest maturities and coupon payments from the government bond portfolio to maintain the expansiveness of the monetary policy. The delegation decision to enable immediate intervention on the foreign exchange market was extended to the ordinary monetary policy meeting in July. 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.


Several members mentioned downside risks linked to uncertainty on the financial market and economic prospects abroad. The members also noted that global inflation is low and that several central banks are expected to conduct very expansionary monetary policy.


In Sweden, economic activity is expected to continue to strengthen. But unexpectedly low inflation outcomes, together with lower energy prices and rent increases than expected, mean that inflation is expected to be weaker in 2016 compared to the assessment in December.


In different ways, the members weighed the pros and cons linked to which monetary policy decision should be made, given the changes in the view of the situation since December. Several members noted that economic activity in Sweden is now strengthening considerably and that the forecast for inflation has been revised down, partly due to factors that have very little to do with the demand side, which could indicate holding the repo rate unchanged. But although inflation is expected to stabilise around the inflation target during 2017, the downward revision in 2016 means that the period of low inflation will be even longer. Several members stressed that this increases the risk of weakening confidence in the inflation target and hence of inflation not rising towards the target as expected. They also noted that monetary policy in Sweden is affected by what other central banks do. If global monetary policy becomes even more expansionary, the krona exchange rate risks strengthening at a faster pace than in the forecast, which would make it harder to push up inflation and stabilise it around 2 per cent. It could also worsen the conditions for a good development in the real economy.


A majority of the board considered, given the above, that it is appropriate to cut the repo rate to −0.50 per cent to support inflation.


Two members instead advocated an unchanged repo rate. However, they shared the majority's concern regarding low inflation, even though they reached a different conclusion with regard to the interest rate on this occasion.


The Executive Board was unanimous that the purchases of government bonds should continue in accordance with the plan decided in October and that maturities and coupons from the government bond portfolio should be reinvested until further notice.


Furthermore, a majority advocated an extended mandate for foreign exchange interventions. One member entered a reservation against this, with the motivation that such interventions would not be appropriate for the time being.


The Executive Board was also unanimous that it is important to have 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.

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