Minutes of the Monetary Policy Meeting held on 2 July 2018

Press release, Minutes At the Monetary Policy Meeting on 2 July 2018, the Executive Board of the Riksbank decided to hold the repo rate at −0.50 per cent. The forecast for the repo rate is unchanged since April and indicates that slow repo rate rises will be initiated towards the end of the year.

A majority of the Executive Board supported the picture of the economic outlook and inflation prospects described in the draft Monetary Policy Report. Economic activity abroad is still favourable and in Sweden, activity is high, the labour market is strong and inflation is on target. It was noted that this picture is largely the same as in April and that the long-term forecasts are mainly unchanged.

At the same time, several members stressed that uncertainty surrounding developments abroad has risen since April, in part due to increased trade restrictions and the economic policy situation in Italy.

The fact that CPIF inflation is now close to 2 per cent and that the forecast for the year ahead has been revised up is mainly due to a rapid rise in energy prices. Measures of underlying inflation indicate that inflationary pressures are still moderate, which, according to several members, raises questions about the development of inflation in the long run. It was noted that a necessary condition for inflation to remain close to 2 per cent is for monetary policy to continue to be expansionary.

Against this backdrop, a majority of the Executive Board considered it appropriate to leave the repo rate and the repo rate forecast unchanged. As before, the forecast indicates that slow rate rises will be initiated towards the end of the year. At the same time, the majority emphasised that monetary policy needed to proceed cautiously with rate rises in this situation.

Several members discussed the volatile development of the exchange rate and the uncertainty the krona entails for inflation. The majority also advocated an extension of the mandate that facilitates rapid intervention on the foreign exchange market. A couple of members pointed out the structural problems on the Swedish housing market and the risks that these pose to economic development in Sweden.

Henry Ohlsson entered a reservation against the decision to hold the repo rate unchanged and against the repo rate path in the draft Monetary Policy Report. He recommended raising the repo rate to −0.25 per cent with reference to the strong economic developments in Sweden and abroad. Martin Flodén also entered a reservation against the repo rate path and advocated a rate path that indicated an initial rate rise of 0.25 percentage points in September or October of this year. Mr Ohlsson and Mr Flodén also entered reservations against the decision to extend the mandate for foreign exchange interventions.

Updated 12/07/2018
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