Minutes of the Monetary Policy Meeting held on 25 April 2023

The members noted that inflation is still far too high and far from the target of 2 per cent. CPIF inflation has fallen since the monetary policy meeting in February, in line with the Riksbank’s forecast, but this is explained entirely by falling energy prices. The members pointed out that inflation excluding volatile energy prices has become significantly higher than expected in recent months, and that the Riksbank’s forecast has been revised upwards. Price pressures in early stages of the production chain have declined, which indicates that inflation will fall back, but the members emphasised that there is considerable uncertainty and that there is still a risk that inflation will become entrenched at a too high level. Several members raised the point that a stronger krona would be desirable in this situation.

Confidence in the inflation target among economic agents is essential for strong and sustainable economic growth. The members noted that long-term inflation expectations continue to remain stable close to 2 per cent. Members also stressed that the two-year collective wage agreements signed in the labour market, covering wage increases of 7.4 per cent, create predictability regarding company costs and clearly reduce the risk of a wage-price spiral.

The members also discussed the concern over certain international banks that led to large fluctuations on the financial markets in March and observed that renewed concern could entail tighter financial conditions.

Following the rapid policy rate hikes over the past year, monetary policy has a tightening effect on the economy and the members assess that after the April meeting there will be scope to adjust the policy rate in smaller steps. However, there is still considerable uncertainty and new information regarding the economic outlook and inflation prospects will be decisive for the conduct of monetary policy.

The members were unanimous that monetary policy needs to be tightened further and remain contractionary so that inflation falls back and stabilises at the target within a reasonable period of time. A majority of the members advocated a rate increase of 0.5 percentage points, and a forecast for the policy rate showing that it will probably be raised further by 0.25 percentage points in June or September. Two members instead advocated an increase in the policy rate of 0.25 percentage points and an interest rate path that indicates a high probability of further increases in June and/or September.