Current forecast for the repo rate, inflation and GDP
15 December 2015
The repo rate
Developments in the Swedish economy have been somewhat stronger than expected, while uncertainty remains on a global level. There has been an upward trend in inflation since last year, but it is not yet on a firm footing. To safeguard the resilience of the upturn in inflation, monetary policy needs to remain very expansionary. The Executive Board of the Riksbank therefore decided at its latest monetary policy meeting in mid-December to hold the repo rate unchanged at -0.35 per cent. Purchases of government bonds will continue for the first six months of 2016, as was decided in October.
The Executive Board of the Riksbank normally makes decisions on the repo rate six times a year. At the same time, a forecast for the repo rate over the coming years, known as the repo rate path, is published. The next monetary policy meeting is planned for 10 February, and the decision will be published on the following day, 11 February.
Repo rate with uncertainty bands
Per cent, quarterly averages
There has been an upward trend in inflation throughout 2015, and inflation expectations have stabilised and begun to rise. The upturn in inflation is volatile, however. The fact that inflation is rising is still mainly due to the weak krona, which has contributed to a rise in the prices of imported goods and services. The contribution to inflation made by the depreciation of the krona is expected to decrease next year. In order to support an upturn in more domestically-generated inflation, continued high levels of demand are therefore needed in the Swedish economy. International prices and the demand for Swedish goods and services rise as the global economy grows stronger. Together with stronger demand in Sweden, this makes it easier for companies to increase prices to offset rising costs. Inflation, measured by the CPIF, is expected to rise gradually and stabilise close to 2 per cent during 2017.
CPI inflation is directly affected by households' interest expenditure. The large repo-rate cuts the Riksbank has made recently thus contribute to holding down CPI inflation. In the long run, when the interest rate has stabilised, the rate of increase in the CPI and the CPIF will be the same.
CPI with uncertainty bands
Annual percentage change
CPIF with uncertainty bands
Annual percentage change
The Riksbank's very expansionary monetary policy is contributing to good growth and falling unemployment. Demand in the economy has broadened and in addition to household consumption and housing investment, exports and business sector investment are also contributing to GDP growth. The increased refugee immigration as a result of the wars in the Middle East will lead to an increase in consumption, primarily in public but also in private consumption. Supported by the expansionary monetary policy, Swedish GDP is expected to grow by 3 per cent on average over the coming years.
GDP with uncertainty bands
Annual percentage change, seasonally-adjusted data
Notes and sources for the figures
The uncertainty bands show the 50, 75 and 90 per cent chances of the repo rate, inflation and GDP being within the respective range. The bands are based on historical forecast errors.
Sources: Statistics Sweden and the Riksbank.