Minutes of the monetary policy meeting held on 3 July 2012

At the meeting, it was noted that there is unease in Europe that is casting a shadow over the Swedish economy. A central issue, for several members of the Executive Board when making the monetary policy decision, was how the unexpectedly strong development of the Swedish economy should be seen in relation to the increased concern about weaker development in the euro area. The Executive Board agreed that the repo rate needs to be low to stimulate the economy. However, there were differences with regard to how expansionary monetary policy should be.

A majority of the members of the Executive Board considered that an unchanged repo rate today and the repo-rate path proposed in the draft Monetary Policy Report, where the repo rate remains at 1.50 per cent for just over one year, represents a well-balanced monetary policy and will lead to the attainment of the inflation target as well as to the stabilisation of resource utilisation around a normal level.

Two members considered that a lower repo rate now and a lower repo-rate path would mean that inflation would attain the target more quickly and that unemployment would be lower, and that monetary policy would then be better balanced. According to them, a lower repo rate would also put the economy in a better initial position if the problems in the euro area were to escalate. Several members, on the other hand, said that current monetary policy cannot take into account improbable catastrophe scenarios. If such a scenario were to occur, monetary policy would face an entirely different situation.

The majority of the members were of the opinion that it is not possible to entirely disregard the risks that could arise when the repo rate is low for a long period of time, and mentioned in this context the high debt ratio among households and the vulnerabilities this creates for the economy.

Otherwise, there was agreement that actual unemployment is currently higher than the long-run sustainable unemployment rate, although there are different assessments of what this rate is. There were also different assessments of what monetary policy can achieve at present with regard to developments in unemployment.

You can read the full minutes of the monetary policy meeting held on 3 July in the attached PDF file.