Current forecast for the repo rate, inflation and GDP

27 Oktober 2016.

Monetary policy

The upturn in the Swedish economy is continuing, but at its most recent monetary policy meeting in late October, the Riksbank assessed that it will take longer before inflation attains the target of 2 per cent. The upturn in inflation therefore needs continued strong support. The Executive Board assesses that the repo rate needs to be held at −0.50 per cent for six months longer than was forecast in September. The probability that the rate will be cut further has increased. The purchases of government bonds will continue during the second half of 2016, as decided by the Board in April. Prior to the monetary policy meeting in December, the Executive Board is prepared to extend the purchases of government bonds.

Repo rate with uncertainty bands

Per cent, quarterly averages

  Repo rate with uncertainty bands

Inflation

CPIF inflation has shown a rising trend since the start of 2014 and long-run inflation expectations are back around 2 per cent. At the same time, inflation has been subdued in recent months. The conditions are nevertheless right for inflation to rise, growth has been high and the labour market has been improving over a number of years. However, it is uncertain how quickly economic activity will affect inflation and how large the effect will be. And the subdued inflation in Sweden reflects developments abroad, which are also marked by low inflation. The Riksbank's forecast is that inflation will reach 2 per cent in the middle of 2018, measured in terms of both the CPI and the CPIF.

CPI with uncertainty bands

Annual percentage change

CPI with uncertainty bands

CPIF with uncertainty bands

Annual percentage change

 CPIF with uncertainty bands

GDP

The Riksbank's expansionary monetary policy, with a negative repo-rate and purchases of government bonds, has contributed to the positive development in the Swedish economy. GDP growth has been high and unemployment has fallen. Despite a slowdown in relation to the strong upturn last year, growth is expected to remain good.

GDP with uncertainty bands

Annual percentage change, seasonally-adjusted data

 GDP with uncertainty bands

 

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.

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