Minutes of the monetary policy meeting held on 24 October 2012

At the meeting on 24 October, it was noted that inflationary pressures are lower and that the recovery on the labour market will be more sluggish than assessed in September. The Executive Board agreed that the repo rate therefore needs to be low for a longer period in order to stimulate the economy and bring inflation in line with the target. However, as at earlier meetings, there were differences with regard to how expansionary monetary policy should be.

Four Board members considered it appropriate to keep the repo rate unchanged at 1.25 per cent. Cutting the repo rate now would not have a particularly significant impact on inflation and economic activity in the year ahead but would, on the other hand, risk leading to inflation being above the target in 2014 and 2015. Two members wished to cut the repo rate, one by 0.25 percentage points and the other by 0.5 percentage points, in order for inflation to attain the target more quickly and for unemployment to begin falling earlier.

All of the members considered it appropriate to adjust the repo-rate path downwards. A majority consisting of four of the members considered that the downward adjustment of the repo-rate path proposed in the draft Monetary Policy Report represented an appropriate balance. They considered that this would lead to CPIF inflation reaching 2 per cent after just over one year and to resource utilisation normalising. The assessment was that the low repo-rate path would mean that the households' debt ratio would not increase but remain at the current level. However, two members considered that there was scope for an even lower repo-rate path and believed that such a path would more quickly lead to an inflation rate of 2 per cent and an unemployment rate closer to a long-run sustainable rate.

All of the members considered that the situation in the euro area remains uncertain and that the downturn there will be more prolonged as a result of the underlying structural problems that continue to burden the economies in the region.

The members agreed that the growth of Swedish GDP is now slowing down following strong growth so far this year and that the recovery on the labour market will be more sluggish than expected. The members also agreed that there are unutilised resources in the Swedish economy at present, although there were different assessments of the level of resource utilisation. There were also different assessments of what monetary policy can achieve at present with regard to reducing unemployment.

All of the members discussed the households' high debt ratio in various ways. However, there were different views on the risks this may pose to the economy. The members expressed a wish for this issue to be taken into account to a greater extent in the analysis in the future.

You can read the full minutes of the monetary policy meeting in the attached PDF file.