Excerpts from the Statement by the Executive Board of the Riksbank:
The good global economic activity is continuing and as expected has entered a phase with lower growth rates. However, inflation abroad has been unexpectedly weak, especially in the euro area. Several central banks have communicated a more expansionary monetary policy. There is still considerable uncertainty over international developments.
Activity in the Swedish economy is high and growth was unexpectedly rapid in the fourth quarter. The high level of demand in recent years has led to strong developments on the labour market with a historically high employment rate. Economic prospects continue to look good despite the economy entering a phase of lower growth than previously.
Inflation and inflation expectations have been close to 2 per cent for about two years. Although inflation is expected to temporarily fall back this year, due to the assessment that energy prices will not increase as quickly as last year, the strong economic activity in Sweden and rising inflationary pressures abroad indicate that inflation will continue to remain close to the target going forward. However, outcomes in recent months suggest that inflationary pressures are slightly weaker than expected and, overall, inflation is now expected to be somewhat lower over the next few years compared with the previous forecast.
Unexpectedly low inflation both in Sweden and abroad, low interest rates abroad and uncertainty over global developments emphasise that there is a need to proceed with caution in monetary policy. The Executive Board has decided to hold the repo rate unchanged at –0.25 per cent and assesses that the rate will remain at this level for a somewhat longer period of time than was forecast in February. The repo rate is expected to be raised again towards the end of the year or at the beginning of next year. Increases in the repo rate thereafter are expected to occur at a somewhat slower pace, compared with the assessment in February.
The Executive Board has also decided that the Riksbank will purchase government bonds for a nominal value of SEK 45 billion from July 2019 to December 2020. This corresponds to around half of the principal payments and coupons that the Riksbank will receive from the bond portfolio during this period. The purchases will take place in order to maintain an appropriate level of holdings and the Riksbank’s presence in the market.