Minutes of the Monetary Policy Meeting held on 11 February 2020

Economic developments both globally and in Sweden have been largely in line with the Riksbank’s forecast in December. Economic activity has shown signs of stabilising, but at the same time, the new coronavirus has contributed to uncertainty. As a result of the epidemic, growth abroad, especially in China, has been revised down in the short term, but it is so far difficult to predict the extent of the economic consequences.

The Swedish economy has slowed from a level of activity that has been higher than normal to a more normal level and inflation has been close to the inflation target of 2 per cent for some time. The unusually mild winter and lower oil prices are contributing to falling energy prices, which will keep inflation down in 2020. Several members felt there is good reason to consider the decline in energy prices as temporary. Different measures of underlying inflation indicate that more persistent inflation is still just below 2 per cent. This suggests inflation will be close to 2 per cent once the effects of low energy prices subside.

The Executive Board noted that the economic outlook and inflation prospects are approximately the same as in December and were unanimous in the decision to, in line with the forecast from December, hold the repo rate unchanged at zero per cent. Given low interest rates globally and uncertainty surrounding the economic outlook and inflation prospects, the Executive Board considers it appropriate to have a continued low policy rate in Sweden as well. With a repo rate of zero per cent in the coming years and the Riksbank’s extensive purchases of government bonds, monetary policy will continue to provide support to economic activity and help keep inflation close to the target going forward.

The Executive Board emphasised that monetary policy will continue to be adjusted if conditions change. However, several members said that positive inflation surprises would not necessarily involve the interest rate being raised earlier than in the Riksbank’s forecast.

The Executive Board also discussed the options available to the Riksbank to act in the event of an economic crisis. The members noted that the Riksbank still has a good level of preparedness and room to act. Given low interest rates abroad, the possibility of the repo rate re-entering negative territory in the future cannot be ruled out, but several members also pointed out the option of using the Riksbank’s balance sheet in different ways in this context. It was also pointed out that the appropriateness of different monetary policy tools also depends on the cause of a decline and on how other policy areas act.