Minutes of the monetary policy meeting held on 15 December 2014

The recovery in economic activity abroad is continuing, but there are significant differences in growth between countries. In the United States and the United Kingdom, growth is solid while the economic outlook for the euro area remains subdued. The oil price has fallen heavily. The lower oil price is expected to give some positive stimulation to growth in many countries. At the same time, the price fall means that the forecast for inflation abroad is lower.

Economic activity in Sweden continues to improve. Since October, economic developments have been in line with the Riksbank's forecasts. GDP and employment are expected to continue rising.

However, inflation is too low and is expected to be somewhat lower for a period of time, primarily due to the falling oil price. In addition, inflation expectations in the longer run have fallen slightly further and are below the inflation target of 2 per cent. For inflation to rise towards the target sufficiently quickly and to reduce the risk of longer-run inflation expectations continuing to fall, monetary policy needs to become more expansionary.

The Executive Board of the Riksbank has therefore decided to hold the repo rate unchanged at zero per cent and assesses that the repo rate needs to remain at zero for a longer period of time, compared with the forecast in October. The expansionary monetary policy underlines the Riksbank's aim to safeguard the role of the inflation target as nominal anchor for price-setting and wage-formation.

The low repo rate, together with rising demand from abroad, is expected to lead to an increase in economic activity in Sweden in the years immediately ahead. Companies will then be able to raise their prices and in this way pass on their cost increases to consumers to a greater extent. This should mean that inflation rises. The new repo-rate path means that the repo rate will remain at zero per cent until CPIF inflation is close to 2 per cent. The assessment is that it will be appropriate to begin increasing the repo rate in the second half of 2016.

If monetary policy needed to become even more expansionary, this would primarily entail continuing to postpone a first increase of the repo-rate. The Riksbank is also preparing further measures that can be used to make monetary policy even more expansionary. Such measures, were they necessary, could be presented with effect from the next monetary policy meeting.

Read the full Minutes of the Monetary Policy Meeting (PDF).