Account of monetary policy in 2018

Good Swedish economic activity and inflation around the target

For several years, the Riksbank has conducted a very expansionary monetary policy to bring up inflation and stabilise it close to the inflation target. The policy has contributed to good growth, high employment and reduced unemployment. The good economic activity has also had an impact on price growth. In 2018, inflation remained around the target and inflation expectations were established around 2 per cent, both in the short and the long term. Target attainment was therefore good. Measured in terms of the Riksbank’s target variable, the CPIF, inflation amounted to 2.1 per cent. Underlying inflation was somewhat lower, however, revealing some uncertainty about the strength of inflationary pressures.

In recent years, both economic activity in general and inflation have developed well in line with the Riksbank’s forecasts and since the end of 2016, the repo rate has been relatively close to the Riksbank’s forecasts.

Unusual monetary policy has had a clear impact

Recent monetary policy, with a negative repo rate and purchases of government bonds, is unusual from a historical perspective.  A summary indicates that the policy has had a clear impact and contributed to higher inflation. As the policy has been unusual, it is natural that it has been the subject of debate and arguments have been put forward in favour of a less expansionary monetary policy and a higher repo rate. However, the Riksbank’s assessment is that the policy conducted has been necessary in order to maintain confidence in the inflation target, which is a prerequisite for favourable economic development. 

The Riksbank’s forecasts hold up well

The Riksbank Study “Evaluation of the Riksbank’s forecasts” compares the Riksbank’s forecasts with those of other analysts, which can give an indication of how accurate the Riksbank’s forecasts were in real time. During the period 2007–2018, the Riksbank had the highest accuracy for GDP growth and was also better than average at forecasting unemployment. The Riksbank was slightly better than average as regards forecasts for CPIF inflation but made the least accurate forecasts for the repo rate. The differences between forecasters are small, however. As regards the forecasts for 2018, the Riksbank was better than average as regards inflation in Sweden and about average regarding GDP growth, unemployment and the repo rate. The study contains a more detailed review of the forecasts by the Riksbank and other analysts.