Monetary Policy Report, November 2021

Demand for both goods and services has varied considerably during the pandemic. The consumption of services fell sharply when large parts of societies closed down partially or entirely. Goods consumption did not fall as much, as consumption shifted from services to goods. In step with most countries having eased the restrictions that have hampered economic developments, demand has risen rapidly. The gradual opening-up of service sectors has led to high GDP growth abroad in the first half of this year.

The rapid movements have strained global supply chains. Production and trade in goods have been restricted by a shortage of inputs such as semiconductors and by freight companies´ difficulties meeting demand. Bottlenecks have also occurred in service production in many places. The supply shocks are creating headwinds for growth but next year, these problems are expected to subside when consumption patterns normalise, demand grows more slowly and production capacity is adjusted.

The difficulties in meeting the rapidly rising demand for goods has led to sharp rises in commodity and transport prices, which has also led to rising producer prices after a certain time lag. Some signs are emerging of more rapidly rising consumer prices for, for example, goods as a result of the supply problems but there are differences between countries. In Sweden and the euro area, the effects on consumer prices has so far mainly been due to rapidly rising energy prices. Energy prices are not expected to rise as quickly next year.

Inflation adjusted for energy prices is expected to continue to rise somewhat and be just over 2 per cent until the end of next summer. When the supply problems subside, CPIF inflation excluding energy is also expected to fall back somewhat. Monetary policy needs to give continued support to the economy for inflation to be close to the inflation target in the slightly longer term.

The Executive Board has therefore decided to hold the repo rate at zero per cent. The asset purchase programme initiated in March 2020 will expire on 31 December. The Executive Board has decided that the Riksbank shall purchase bonds for SEK 37 billion in the first quarter of 2022 to compensate for forthcoming principal payments. The Executive Board’s forecast is that holdings will be approximately unchanged in 2022 and then decrease gradually. The forecast for the repo rate path indicates that the repo rate will be raised in late 2024.