Minutes of the Monetary Policy Meeting held on 6 September 2016

At its monetary policy meeting on 6 September, the Executive Board of the Riksbank decided to hold the repo rate unchanged at −0.50 per cent and to continue purchasing government bonds during the second half of 2016, according to the plan adopted in April. Not until the second half of 2017 does the Executive Board consider it appropriate to begin slowly increasing the repo rate. 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 the economic development and the inflation outlook described in the draft Monetary Policy Report. Since the monetary policy meeting in July, economic developments both in Sweden and internationally have been largely in line with the Riksbank's forecast. Recovery abroad is continuing at a moderate pace supported by very expansionary monetary policy. There is still considerable economic policy uncertainty abroad, however, as a result of factors such as the outcome of the United Kingdom EU referendum and weaknesses in the European banking system.

In Sweden, the Riksbank has successively cut the repo rate to –0.50 per cent and undertaken comprehensive purchases of government bonds, which has had a broad impact and pushed many interest rates down. This has contributed to a positive development in the Swedish economy with solid growth, falling unemployment and rising inflation. Resource utilisation in the economy is rising, which normally affects the rate of price increase with a certain time lag. Inflation is expected to reach 2 per cent during 2017. The outlook for economic activity and inflation in Sweden is largely the same as in July and the Executive Board was in agreement that it is important for inflation to continue to approach the target and that confidence in the inflation target does not weaken. Now, as then, continued expansionary monetary policy is therefore needed.

The Executive Board agreed unanimously to hold the repo rate unchanged at –0.50 per cent and to continue to purchase government bonds in the second half of 2016 in line with the plan adopted in April. The Executive Board deems that the repo rate will start to be slowly increased during the second half of 2017. Until further notice, maturities and coupons from the portfolio of both nominal and real government bonds will be reinvested.

The Swedish economy is well equipped but there may be negative surprises along the way. There are many sources of uncertainty as regards the inflation forecast, not least the Swedish krona's development. For this reason, the Executive Board also agreed that it is important to continue to have a high level of preparedness to make monetary policy even more expansionary, even between the scheduled monetary policy meetings, if need be to safeguard confidence in the inflation target.

Interest rates need to be low at present to safeguard the inflation target. But the low level of interest rates is associated with risks and a combination of measures is required within various policy areas to ensure long-term sustainable economic development in Sweden. This is not least true for developments on the housing market and with household debt.

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