Current forecast for the repo rate, inflation and GDP

15 February 2017

Monetary policy

Economic activity is strengthening, but there is considerable political uncertainty abroad and the risks of a setbacks have increased. For inflation to stabilise around 2 per cent, a continued strong level of economic activity and a krona that does not appreciate too rapidly are required. Monetary policy therefore still needs to remain expansionary. The Executive Board of the Riksbank decided at its most recent monetary policy meeting in the middle of February to hold the repo rate unchanged at -0.50 per cent. The so-called repo rate path reflects the fact that there is still a greater probability that the repo rate will be cut than that it will be raised in the near term, and that slow increases will not begin until the start of 2018. The purchases of government bonds will continue for the first six months of 2017, as was decided in December.

Repo rate with uncertainty bands

Per cent, quarterly averages

  Repo rate with uncertainty bands

Inflation

Inflation has shown a rising trend since 2014. CPIF inflation (the CPI with a fixed mortgage rate) was close to 2 per cent in December, but the recent upturn has been primarily driven by a temporary rise in energy prices. Excluding energy prices, inflation is still low. The strong economic activity creates good conditions for inflation to continue rising. However, inflation is not expected to stabilise around 2 per cent until the end of 2018.

CPI with uncertainty bands

Annual percentage change

CPI with uncertainty bands

CPIF with uncertainty bands

Annual percentage change

 CPIF with uncertainty bands

GDP

In recent years, the Swedish economy has developed positively, with high growth and falling unemployment. The Riksbank's expansionary monetary policy, with a negative policy rate and purchases of government bonds, has contributed to this positive development by pushing down interest rates. Economic activity in Sweden is expected to strengthen further in the coming years. GDP growth is deemed to be higher than normal and the labour market is increasingly strained.

GDP with uncertainty bands

Annual percentage change, seasonally-adjusted data

 GDP with uncertainty bands

Notes and sources for the figures

The uncertainty bands illustrate the 50, 75 and 90 per cent chances of the repo rate, inflation and GDP growth being within the respective range. The bands are based on historical forecast errors. The uncertainty bands for the repo rate do not take into account the fact that there may be a lower bound for the repo rate. The outcomes for GDP are also uncertain, as the National Accounts figures are revised several years after the first publication.


Sources: Statistics Sweden and the Riksbank.

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