Monetary Policy Report, February 2021

The Swedish economy has withstood the second wave of infection relatively well, supported by extensive economic policy measures. Vaccinations are now underway in many countries and despite continued uncertainty, the conditions for a rise in demand will be favourable when the spread of infection and restrictions are reduced. To facilitate the recovery and help inflation rise towards the target, monetary policy needs to remain expansionary. The Riksbank is therefore continuing to purchase assets within the envelope of SEK 700 billion. The repo rate is being left unchanged at zero per cent.

Repo rate

0%
Applies from 17 February 2021

Repo rate, table

In brief – Monetary policy February 2021

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The second wave of infection that started to affect many countries during the autumn led to tightened restrictions and a slowdown in the recovery of the global economy. But vaccinations are now underway in many countries and, despite continued uncertainty, the conditions for an upturn in demand will be good when the spread of infection and restrictions are reduced. After the slowdown during the winter, the global economy is expected to continue to recover.

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Several service industries in Sweden are still under pressure but overall the economy seems to have been more resilient to the second wave of the pandemic than to the first. GDP growth and employment have been higher than expected and the Swedish economic outlook is brighter than it was at the monetary policy meeting in November. Developments differ among industries and sectors but total economic activity is expected to approach a more normal situation next year.

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As in 2020, inflation is expected to vary more than usual this year, due in part to volatile energy prices but also to measurement problems and changed patterns of consumption during the pandemic. In 2022, the upturn in inflation is expected to be more stable, but the extent of the crisis means that it will take until 2023 before inflation is expected to be close to the target of 2 per cent more permanently.

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Without the Riksbank’s measures, the crisis would have been both deeper and more prolonged. To facilitate the recovery, the Riksbank is continuing to purchase assets within the envelope of SEK 700 billion and to offer liquidity within all the programmes launched in 2020. The Executive Board has also decided to hold the repo rate unchanged at zero per cent. The Riksbank will continue to formulate monetary policy so that there is extensive monetary policy support for as long as necessary in order to support the recovery and inflation.

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Updated 10/02/2021