The path to a monetary policy decision
The Executive Board holds five scheduled monetary meetings a year. Decisions on the repo rate are made at these meetings. After each meeting a press release is published that reports the monetary policy decision, the Riksbank's views on economic activity and inflation and the future monetary policy the Executive Board considers to be well-balanced. A Monetary Policy Report is also published. This describes in more detail the Riksbank's view of the economic prospects.
The Executive Board's monetary policy meetings are scheduled around six months in advance, partly as fixed points in the internal work, and partly to inform the general public and others who regularly follow developments in monetary policy.
Bases for the decisions
The forecasting work prior to each monetary policy meeting begins with the Monetary Policy Department (APP) analysing new statistics and new events in the economy. The department then produces a main forecast for how inflation, the repo rate and the economy will develop. This work is carried out with the aid of various models. The models are used primarily to produce alternative forecasts for the repo rate, inflation and the economy. These alternative scenarios show how developments will be if special events in the economy occur or if monetary policy is conducted differently than is assumed in the main forecast. At a relatively early stage of the process APP presents its forecast alternatives to the Executive Board at a meeting of what is known as the monetary policy group. At this meeting there is a discussion between the members of the Executive Board and employees of the Monetary Policy Department on the main forecast and the alternative scenarios.
Afterwards, the Monetary Policy Department continues its work and compiles a document that is a first draft of the Monetary Policy Report. This document is revised at a meeting of the Executive Board, where the Executive Board continues to discuss the various alternative forecasts and how they shall be communicated in the Monetary Policy Report. The editorial work on the Monetary Policy Report continues, but after the monetary policy meeting the final adjustments are made to the text. The Monetary Policy Report is published on the Riksbank's website at the same time as the decision on the repo rate is published; normally the day after the monetary policy meeting.
On the basis of the work described above, the Executive Board establishes its joint view of what is considered a well-balanced monetary policy, giving consideration to inflation and the developments in the real economy during the forecast period. Naturally, there are occasionally differences of opinion in the Executive Board as to how inflation and the real economy will develop and thereby as to what would be a well-balanced monetary policy. In these cases, it is the majority view that is expressed in the decision and in the Monetary Policy Reports.