Developments both in Sweden and abroad are largely in line with the Riksbank’s forecasts. However, increasing unease over further deterioration in trade relations and a faster decline in global economic activity have clearly affected pricing on the financial markets, where interest rates on the whole have fallen. But growth abroad is relatively good and confidence among both households and companies indicates normal growth in the coming period. With the information now available, the Riksbank assesses that there is no reason to make any major adjustments to the forecasts for international inflation and growth.
Activity in the Swedish economy has remained high since the monetary policy meeting in April. Resource utilisation is expected to be high even though developments on the labour market will enter a calmer phase in the years ahead. Inflation has been close to 2 per cent since the beginning of 2017. In line with the Riksbank’s forecast, CPIF inflation amounted to 2.1 per cent in May.
The economic outlook and inflation prospects remain good. Overall, the new information since the monetary policy meeting in April has not changed the assessment of the conditions for inflation to remain close to 2 per cent. The Executive Board has therefore decided to leave the repo rate unchanged at –0.25 per cent. The forecast for the repo rate is also unchanged and indicates that it will be increased again towards the end of the year or at the beginning of next year. This means that inflation will receive continued support from monetary policy to remain close to 2 per cent. In accordance with the decision in April, the Riksbank will purchase government bonds for a nominal amount of SEK 45 billion, with effect from July 2019 to December 2020.
However, the risks concerning international developments may have a bearing on the economic outlook and inflation prospects for Sweden as well. The downturn in international bond yields can indicate that global interest rates going forward will be low for a longer period to come. This underlines the importance of proceeding cautiously with monetary policy. If the conditions for inflation change were to change, monetary policy will be adjusted.