Minutes of the Monetary Policy Meeting held on 6 September 2017

At the monetary policy meeting on 6 September 2017, the Executive Board of the Riksbank decided to change the target variable for monetary policy from the CPI to the CPIF and to start using a variation band to illustrate that the development of inflation is uncertain. It also decided to hold the repo rate unchanged at –0.50 per cent. The first rate increase is expected to occur in mid-2018, which is the same assessment as in the Monetary Policy Report in July. The purchases of government bonds will continue during the second half of 2017, as decided by the Executive Board in April.

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

Economic activity abroad continues to strengthen but inflation is subdued. Normalisation of monetary policy around the world appears to be taking longer than expected.

The Executive Board noted that the Swedish economy is strong and welcomed the fact that inflation, after a long period below the target, has now picked up and is close to 2 per cent. But there are some temporary factors behind the most recent upturn in inflation and the krona has strengthened more rapidly than in the forecast in July.

Several board members pointed out that a very expansionary monetary policy has been required to bring up inflation and that it would be risky to now make monetary policy less expansionary. For inflation to stabilise around the target, economic activity needs to remain strong and have an impact on price growth. The development of the krona is also of considerable significance for inflation. A major or rapid appreciation of the krona would make it more difficult to stabilise inflation around the target. This could happen if, for example, Swedish monetary policy deviates too far from that of other countries.

Several board member highlighted the issue of overheating in the Swedish economy and noted that there are currently no clear signs of this as neither prices nor wages are rising in an unbalanced way. But developments in the housing sector require particular attention. The high level of household indebtedness is something that the Riksbank has been worried about for a long time. Debt has been rising for a long time, even when interest rates were higher, as a result of structural problems. Imbalances have thus been built up and this creates risks for the Swedish economy. After a long time with inflation and inflation expectations below target, however, monetary policy needs to focus on safeguarding the inflation target.

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