Monetary Policy Report, February 2022

The sharp fall in GDP abroad during the beginning of the pandemic has largely been recovered. Following the rapid upturn, the growth rate slowed down, although global growth prospects remain bright. An increasing number of countries now assess that COVID-19 is not a danger to society and are removing the remaining restrictions. Not least, conditions are good for household consumption to develop strongly.

In most parts of the world, inflation has risen rapidly over the past year. One common feature is that a large part of the upturn can be explained by rapidly rising energy prices. However, adjusted for energy prices, there are major differences between countries. For instance, in the United States and the United Kingdom, underlying inflation has risen to relatively high levels.

In Sweden, the high inflation is entirely explained by rapid in-creases in electricity and fuel prices. Inflation adjusted for energy prices is close to 2 per cent. The Riksbank does not expect energy prices to continue to rise this year. This means that inflation will fall back. Although it is uncertain how lasting the high rate of inflation will be, in the forecast inflation is expected to be close to 2 per cent from the middle of next year. Compared with November, the assessment has been revised upwards.

Monetary policy needs to provide continued support for inflation to be close to target in the medium term. The Executive Board has therefore decided to keep the repo rate at zero per cent and that the Riksbank shall purchase bonds for SEK 37 billion in the second quarter of 2022 to compensate for maturing assets. The Executive Board’s forecast is, as before, that the holdings will remain approximately unchanged in 2022 and then decrease gradually. The forecast for the repo rate indicates that it will be raised in the second half of 2024, which is slightly earlier than in the assessment in November.