Excerpts from the Statement by the Executive Board of the Riksbank:
Developments in the Swedish economy have been somewhat stronger thanexpected, while uncertainty remains globally. There has been an upward trend in inflation since last year, but it is not yet on a firm footing. To safeguard the resilience of the upturn in inflation, monetary policy needs to remain very expansionary. The Executive Board of the Riksbank has therefore decided to hold the repo rate unchanged at –0.35 percent. Purchases of government bonds will continue for the first six months of 2016 as was decided in October. The Board is also highly prepared to make monetary policy even more expansionary, even between the ordinary monetary policy meetings.
The Riksbank's very expansionary monetary policy is contributing to good growth, falling unemployment and an upward inflation trend. The sharp increase in the number of asylum seekers coming to Sweden is expected to lead to an increase in public expenditure, which will contribute to higher GDP growth and lower unemployment in the coming years. The consequences for monetary policy in the coming period are deemed to be minor, however.
There is now a broad economic upturn, there has been an upward trend in inflation throughout the year and inflation expectations have stabilised and begun to rise. The upturn in inflation is volatile, however, as is illustrated by the unexpectedly weak outcome for November. The fact that inflation is rising is still mainly due to the weak krona, which has contributed to a rise in the prices of imported goods and services. The contribution to inflation made by the depreciation of the krona is expected to decrease next year. In order to also support an upturn in more domestically-generated inflation, continued high levels of demand are therefore needed in the Swedish economy.
The Executive Board deems that the repo rate will not be raised until CPIF inflation has stabilised around 2 percent during the first half of 2017 and remains highly prepared to make monetary policy even more expansionary, even between the ordinary monetary policy meetings. The repo rate can be cut further, which is reflected in the repo rate path, and the Riksbank can purchase more securities. The Riksbank is also ready to intervene on the foreign exchange market if the upturn in inflation should be threatened as the result of a problematic market development, for example. Moreover, the Riksbank is prepared to launch a programme of lending to companies via the banks.