Minutes of the Monetary Policy Meeting held on 3 July 2017

At the Monetary Policy Meeting on 3 July, the Executive Board of the Riksbank decided to hold the repo rate unchanged at –0.50 per cent. The first rate increase is not expected to be made until the middle of 2018, which is the same assessment as in April. The purchases of government bonds will continue during the second half of 2017, in line with the plan decided in April.

The Executive Board agreed on the picture of the outlook for economic activity and inflation described in the draft Monetary Policy Report.

 

International developments have improved in line with the Riksbank's earlier forecasts, the recovery in the euro area appears, if anything, more robust and the risks of a setback are considered to have declined. It was noted that inflationary pressures primarily in the euro area are still low and that monetary policy abroad is expected to remain expansionary for a long time, something that Swedish monetary policy needs to take into account.

 

Swedish economic activity is strong and inflation has risen, becoming somewhat higher than expected in recent months. However, several board members emphasised that it was not sufficient for inflation to temporarily touch the 2 per cent mark. After a long period of below-target inflation, it is now particularly important that inflation is sustained close to 2 per cent. Ensuring this requires continued strong economic activity that gradually makes a greater impression on price growth. Several members here pointed to the importance of the krona not appreciating too rapidly in the current situation.

 

All members considered it a well-balanced policy to hold the repo rate unchanged at –0.50 per cent. A rate increase is not expected until mid-2018. As inflation has been somewhat higher than expected recently, and the risks abroad are considered to have declined, it is now somewhat less likely than before that the repo rate will be cut further in the near term. However, this does not rule out repo rate cuts in the period ahead. A couple of members also pointed out that it is important that the market does not pre-empt future rate increases, as this could make the Riksbank's work on attaining the inflation target more difficult.

 

Government bond purchases will continue during the second half of the year, as decided in April, and maturities and coupon payments will be reinvested in the government bond portfolio until further notice.

 

It was also discussed at the meeting why wage growth in the period ahead is expected to be relatively low and how this affects inflationary pressures. Furthermore, the risks associated with high and rising household indebtedness were also discussed.

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