Minutes of Monetary Policy Meeting held on 1 July 2015
At the monetary policy meeting on 1 July, the Executive Board of the Riksbank decided to cut the repo rate by 0.10 percentage points to -0.35 per cent and to extend the purchases of government bonds by a further SEK 45 billion from September and until the end of the year. The repo rate is expected to be around -0.35 per cent for just over a year. The repo-rate path also reflects the fact that it is possible to cut the repo rate further. 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.
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.
Inflation in Sweden has been rising for some time now, partly as a result of the krona weakening over the past twelve months. As economic activity grows stronger, however, domestic cost pressures also increase and it will be easier for companies to raise their prices. CPIF inflation is expected to be close to 2 per cent from the end of 2015. GDP is expected to grow more rapidly than normal in the years ahead and the labour market continues to improve.
Growth is also rising abroad, but uncertainty has increased as a consequence of the most recent events in Greece. The forecasts are based on the events in Greece not hampering recovery in the euro area.
Compared to the Riksbank's forecast in April, the krona has grown stronger, and its exchange rate thereby poses a risk to the upturn in inflation.
The Executive Board was in agreement that in this uncertain environment, monetary policy needs to be even more expansionary to ensure that inflation continues to rise towards the target of 2 per cent.
All the board members considered it appropriate to increase purchases of government bonds by a further SEK 45 billion. Five members also advocated a cut in the repo rate by 0.1 percentage points to -0.35 per cent, although one member wished to leave the rate unchanged at -0.25 per cent.
The board members ascertained that the Riksbank still had a high level of preparedness to make monetary policy even more expansionary if necessary, even between the ordinary monetary policy meetings.
The Executive Board stressed that because of the prevailing uncertainty surrounding events in Greece, the Monetary Policy Report had become a living document right up to the day before the monetary policy meeting.
Developments in the rest of the world, the urgent need to deal with the mandate and tools in the macroprudential policy area and the importance of measures in this area were other topics discussed at the meeting.
