Current forecast for the repo rate, inflation and GDP
9 April 2014
The repo rate
Economic activity is clearly strengthening, but inflation is expected to remain low for some time. Monetary policy needs to remain expansionary for inflation to rise towards the target. The Executive Board of the Riksbank therefore decided at its most recent monetary policy meeting at the beginning of April to hold the repo rate unchanged at 0.75 per cent. The repo rate is expected to remain at this low level for around a year. The Board considered it appropriate to wait until inflation picks up before beginning to raise the repo rate.
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 2 July, and the decision will be published on the following day, 3 July.
Repo rate with uncertainty bands
Per cent, quarterly averages
Although economic activity is clearly strengthening, inflation is expected to remain low for the rest of the year. Price increases have been low over a long period of time in relation to developments in companies' costs. However, as economic activity strengthens, companies are expected to be able to raise their prices to an increasing extent. CPIF inflation is also expected to begin to rise towards the end of the year and to be close to 2 per cent during the latter part of 2015.
CPI inflation, which includes the direct effects of changes in interest rates, will rise faster than CPIF inflation. This is because when the Riksbank raises the repo rate, household mortgage rates will also rise, which will affect the CPI but not the CPIF. In periods of significant changes in the repo rate, the CPIF provides a better picture of inflationary pressures. In the longer run, when the repo rate has stabilised, CPI inflation and CPIF inflation will coincide.
CPI with uncertainty bands
Annual percentage change
CPIF with uncertainty bands
Annual percentage change
GDP growth was unexpectedly high in the fourth quarter of last year. This was partly due to temporary factors, but the broad upturn in demand implies that an economic upturn has begun. The prospects for the Swedish economy also remain bright. Export orders are increasing, at the same time as households and companies are relatively optimistic about the future. The labour market is expected to improve significantly during the second half of the 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.