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Riksbank Executive Board

Riksbank: Minutes of the Monetary Policy Meeting held on 26 April

The recovery is well underway, but it will take time before inflation is more permanently close to the target of 2 per cent. Continued expansionary monetary policy is therefore needed to support the economy and inflation. At the monetary policy meeting on 26 April, the Executive Board of the Riksbank decided to hold the repo rate unchanged at zero percent and it is expected to remain at this level in the years to come. The Riksbank is also continuing to purchase assets within the envelope of SEK 700 billion and to offer liquidity within all the programmes launched in 2020.

The recovery is continuing in the global economy despite an increase in the spread of infection. Rapid and powerful fiscal and monetary policy measures abroad and in Sweden have mitigated the economic downturn and prevented a financial crisis. The economic outlook is somewhat brighter now that at the monetary policy meeting in February. But at the same time, the board members noted that the crisis has resulted in a divergence across countries, sectors and various groups in the labour market. Parts of the service sectors are still weighed down by the restrictions. The ongoing vaccinations are an important condition for slowing down the spread of infection, easing the restrictions and enabling production in contact-intensive service sectors to pick up again.

The board members pointed out that there will be substantial volatility in inflation during the coming year, as a result of the pandemic and volatile energy prices. In this context, the importance of longer-term inflation expectations remaining stable at 2 per cent was also pointed out.

The recovery in the Swedish economy is well underway, but cost pressures are expected to rise relatively slowly and, as in the February forecast, it will take time before inflation is more permanently close to the target of 2 per cent. It is the assessment of the Executive Board that continued expansionary monetary policy will be needed over the coming years to support the economy and bring inflation close to the target more permanently. The members were therefore in agreement on leaving the repo rate unchanged at zero per cent and on the distribution of asset purchases during the third quarter of 2021. Several stressed the importance of, as announced, utilising the entire envelope for asset purchases of SEK 700 billion in 2021 and after that keeping the holdings more or less unchanged over next year. This is to avoid the risk of an unwanted tightening of financial conditions.

The members also discussed how monetary policy may be adapted if economic developments turn out differently to the main scenario. Several noted that if the recovery is stronger than expected and inflation overshoots the target, this does not need to be a reason to make monetary policy less expansionary. If monetary policy needs to be made more expansionary, a few members pointed out that a rate cut is fully possible.

At the meeting, some members highlighted the risks associated with developments in the housing market and underlined how important it is that Sweden gets to grips with existing structural problems in the housing market.

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