Minutes of the monetary policy meeting held on 16 April

It was noted at the meeting that the recovery in the economy was expected to be gradual and that the labour market would improve next year. An increasing number of indicators, in the form of both soft and hard data, support the picture of growth prospects improving in Sweden and other parts of the world. Inflationary pressures are low. It is now expected to take longer before inflation rises, and CPIF inflation is not expected to reach 2 per cent until 2015. At the same time, there are signs that housing prices are increasing at a faster pace and this contributes to the upward revision in the forecast for household debt. The largest changes in relation to the forecasts in the February Monetary Policy Report concern inflation in the coming period and developments in household debt.

The Executive Board was unanimous that monetary policy needs to be more expansionary, given the low inflation. A majority of Executive Board members considered at the same time that the high level of household debt was something that should be taken into consideration in their monetary policy. Rising debt is considered to increase the risk of a sharp increase in unemployment and long-lasting difficulties in attaining the inflation target.

A majority of four members thus assessed that it was appropriate to hold the repo rate unchanged at 1 per cent until the second half of 2014, which is around one year longer than was forecast in the Monetary Policy Report published in February. The monetary policy conducted is expected to stimulate economic developments and inflation at the same time as taking into account the risks linked to households' high indebtedness.

Two members considered that there was scope for a lower repo-rate path and they advocated cutting the repo rate to 0.75 and 0.50 per cent respectively and lower repo-rate paths so that CPIF inflation would reach the target of 2 per cent more quickly and unemployment would come closer to a long-run sustainable rate more quickly. They assessed that these lower repo-rate paths would lead to very minor increases in the household debt ratio and would not tangibly affect possible risks connected with household debt.

The future development of the repo rate was also discussed at the meeting. If the repo rate needs to be adjusted in the coming period, it is slightly more likely that it will be cut than that it will be raised, which is due to the low inflationary pressures and continuing uncertainty over developments in the euro area. The Executive Board also discussed developments abroad, both the risk of poorer developments and the possibility of more positive outcomes. The members raised the question of the Swedish krona and its significance for the economy and inflation, as well as whether monetary policy should take into account the risk of high debt. There was also discussion of how far monetary policy can influence unemployment and the debt ratio.

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