Current forecast for the repo rate, inflation and GDP
3 September 2015
The repo rate
Economic activity in Sweden is strengthening and inflation is showing a clear upward trend. Even though uncertainty continues to be high internationally, the economic outlook and inflation prospects are largely unchanged since the Riksbank's last monetary policy decision in July. The Riksbank decided at its latest monetary policy meeting at the beginning of September to hold the repo rate unchanged at -0.35 per cent. The expansionary monetary policy, with a negative interest rate and the previous decision to purchase government bonds until the end of the year, is supporting the continued positive development of the Swedish economy so that CPIF inflation can be expected to be close to 2 per cent in 2016. The Riksbank remains highly prepared to make monetary policy even more expansionary in the event of inflation prospects deteriorating.
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 27 October, and the decision will be published on the following day, 28 October.
Repo rate with uncertainty bands
Per cent, quarterly averages
There has been a clear upward trend in inflation since last year. In July, CPIF inflation was 0.9 per cent and the CPIF excluding energy was 1.5 per cent. The trend of rising inflation is expected to continue. In the immediate future, inflation will certainly be restrained by the falling oil and electricity prices in Sweden. But the low interest rates, stronger economic activity in Sweden and the rest of the world and a weaker krona over the last year are creating good conditions for inflation to rise clearly in the period ahead. In 2016, inflation is expected to be close to 2 per cent.
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
Despite weak international demand, GDP growth has been relatively good in the Swedish economy in recent years. It has thus largely been driven by domestic demand, with strong consumption and strong housing investment. Demand is expected to broaden in the period ahead. Higher international growth will lead to faster Swedish export growth, which will eventually also increase the need for new investments. Supported by the expansionary monetary policy, GDP is expected to grow by about 3 per cent per year over the forecast period, which is faster than the historical average.
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.