Current forecast for the repo rate, inflation and GDP
Date
Repo rate
Inflationary pressures are low and the economic outlook in Sweden is weak as a result of developments abroad. It has been clear for some time that there would be a downturn, but the downturn has been more severe than expected. In order to stabilise inflation around 2 per cent and resource utilisation in the economy around a normal level, the Executive Board of the Riksbank therefore decided at its latest monetary policy meeting in February to cut the repo rate by 0.25 percentage points to 1.50 per cent.
The repo rate is expected to remain at this level until some time in 2013. Later on, when inflationary pressures increase, the repo rate will need to be gradually raised.
The next decision on the repo rate and forecasts will be published on 19 April
The fact that the Riksbank presents its views on an appropriate path for the repo rate does not mean that it is committing itself to a particular future monetary policy. The repo-rate path is a forecast and not a promise. As with all forecasts, the forecast for the repo rate may need to be changed on the basis of new information that affects the prospects for inflation and economic activity in Sweden.
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 decision on the repo rate always applies until the next monetary policy meeting, when a new decision is made. The next meeting is planned for 18 April, and the decision will be published on the following day, 19 April.
Repo rate with uncertainty bands
Per cent, quarterly averages
Inflation
Inflation measured in terms of the CPIF, that is the CPI (Consumer Price Index) with a fixed mortgage rate, is low. The main reasons for this are that cost pressures have been low and that the krona has strengthened in recent years. The weak demand in Sweden and abroad will help to keep inflationary pressures low in the years ahead.
Inflation measured in terms of the CPI is higher than the CPIF. During periods with large interest rate adjustments, measures of inflation that do not include interest rate costs, such as CPIF inflation, provide a better picture of underlying inflationary pressures. In the longer run, when the repo rate has stabilised, CPI inflation and CPIF inflation will coincide.
CPI with uncertainty bands
Per cent, quarterly averages
CPIF with uncertainty bands
Per cent, quarterly averages
GDP
Sluggish growth in the euro area has subdued the demand for Swedish exports, which slowed down significantly in late 2011. The weaker economic outlook has led the households to begin saving more and to postpone their consumption, while the companies are postponing their investment. All in all, GDP growth in Sweden will therefore be low in the period immediately ahead. The confidence of the Swedish households and companies will gradually return once the concern about public debts in the euro area subsides and the Riksbank’s assessment is that the Swedish economy will grow at a more normal rate next year.
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.
