Current forecast for the repo rate, inflation and GDP
4 April 2016
Economic activity is strengthening and inflation is rising. However, the upturn in inflation is fitful. At the same time, there is still uncertainty over global developments and monetary policy abroad is very expansionary. To safeguard the rising trend in inflation, monetary policy in Sweden needs to continue to be expansionary. The Executive Board of the Riksbank therefore decided at its monetary policy meeting in April to purchase government bonds for a further SEK 45 billion during the second half of 2016. This will reduce the risk of the krona appreciating faster than in the forecast and of a break in the upturn in inflation. The purchases cover both nominal and real government bonds, corresponding to SEK 30 and SEK 15 billion, respectively. The repo rate was left unchanged at -0.50 per cent.
Repo rate with uncertainty bands
Per cent, quarterly averages
CPI inflation has been held back by falling interest costs and continues to be low. In contrast, CPIF inflation has shown a rising trend since the beginning of 2014. Inflation was slightly higher than expected at the start of the year. But it is expected to undershoot the target in 2016, too.
Inflation will nevertheless remain low for some time to come as the result, among other reasons, of earlier large energy price falls and dampened price increases for imported goods due to the recent appreciation of the krona. However the conditions for rising inflation in the period ahead are deemed to be good. The Swedish economy is growing quickly and resource utilisation is rising. With the stronger development of the labour market, wages are expected to increase more rapidly and higher demand will make it easier for companies to raise their prices. CPIF inflation is expected to stabilise around 2 per cent during 2017.
CPI with uncertainty bands
Annual percentage change
CPIF with uncertainty bands
Annual percentage change
Growth in the Swedish economy is strong, underpinned by the Riksbank's expansionary monetary policy. GDP grew by 4.1 per cent for the whole year 2015. Domestic demand has been high and exports have increased rapidly despite the weak development of world trade and the Swedish export market. Even if growth will gradually become lower over the forecast period, average GDP growth is expected to be higher than normal in the coming years.
The situation on the labour market is also continuing to improve. Employment is rising and unemployment will fall during 2016 and 2017.
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.
Did you find this information helpful?
Thank you for your help!