Minutes of the monetary policy meeting held on 12 February 2014

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. The economic prospects and the inflation outlook in Sweden and abroad are well in line with the assessments in the December Monetary Policy Update. After just over a year of weak GDP growth, the prospects look good for 2014. Economic activity is strengthening abroad, the confidence of Swedish households and companies is higher than normal and employment is increasing. GDP growth is expected to pick up during the year and there will be a rather tangible improvement on the labour market by the end of the year.

Despite the improvement in economic activity, inflation is expected to remain low in the year ahead. Once international and domestic demand strengthens, however, there will be a gradual increase in inflationary pressures and CPIF inflation is expected to reach 2 per cent in 2015. The low inflationary pressures justify the continued conduct of an expansionary monetary policy. At the same time, the indebtedness of Swedish households is still high and is expected to increase somewhat during the forecast period, a factor that continues to pose a risk to long-term sustainability. Several policy areas need to cooperate to reduce the risks linked to indebtedness.

Given the low inflationary pressures, all of the members of the Executive Board considered that it was appropriate to leave the repo rate unchanged at 0.75 per cent until the recovery reaches firmer ground and inflation picks up. According to the forecast, it will be appropriate to begin slowly raising the repo rate in early 2015. In this way, monetary policy will contribute to CPIF inflation reaching 2 per cent in 2015.

Other topics discussed at the meeting were the need for further analysis of the low inflationary pressures and the need to adjust monetary policy if the development of inflation proves to be weaker than in the forecast. The effects of the exchange rate on inflation were also discussed in connection with this. The discussion also touched upon aspects of conducting monetary policy in a small, open economy with substantial capital flows, extensive imports and exports and a high level of household indebtedness. The need to implement macroprudential policy measures was emphasised. Global risks to economic development stemming from financial unease relating to imbalances in certain emerging economies were also discussed.

Read the full minutes of the monetary policy meeting.