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In addition, the repo-rate path has been adjusted downwards somewhat. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
The Executive Board has also decided to purchase nominal government bonds to a value of SEK 10 billion. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
If this proves insufficient to get inflation to rise towards the target, the Riksbank can quickly make monetary policy even more expansionary. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
The measures taken and the readiness to do more underline the Riksbank's aim to safeguard the role of the inflation target as a nominal anchor for price setting and wage formation. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Economic activity in Sweden strengthening but inflation is too low | 12/02/2015 | Feb-15 | par_title | null | null | null | positive |
Economic activity in Sweden continues to improve in line with the forecast in December. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
Weak development abroad is dampening growth but is counteracted somewhat by the fall in oil prices and the weak krona. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Following a slowdown at the end of last year, the labour market is expected to strengthen. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
Inflation is still low, although it was somewhat higher than expected in December. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
There are now signs that underlying inflation, illustrated by CPIF inflation excluding energy, has bottomed out and is rising. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
The krona is weaker than anticipated, which will also contribute to somewhat higher underlying inflation going forward. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
However, low energy prices are expected to hold down CPIF inflation in the year immediately ahead. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
Wages are expected to increase more rapidly as resource utilisation rises and it will be easier for the companies to pass on their cost increases. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
CPIF inflation is thus expected to rise and reach 2 per cent in mid-2016. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
Lower interest rates support upturn in inflation | 12/02/2015 | Feb-15 | par_title | null | null | null | positive |
The recent development of inflation has been roughly as expected, but there is a risk that lower oil prices will dampen inflation expectations, and thus inflation, more than is assumed in the forecast. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
To this can be added the increased uncertainty about developments abroad and on the financial markets. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
In order to support the upturn in underlying inflation so that CPIF inflation approaches 2 per cent and to ensure that long-term inflation expectations are compatible with the inflation target, a more expansionary monetary policy is needed. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
The repo rate is now being cut to −0.10 per cent and the repo-rate path is being revised downwards. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
At the same time, interest rates for fine-tuning transactions will be restored. | 12/02/2015 | Feb-15 | par_body | null | null | null | hawkish |
Shorter market rates are thereby expected to fall which will lead to lower funding costs for the banks and lower interest rates for households and companies. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
Lower interest rates in the economy stimulate consumption and investment, which is expected to lead to rising demand and increasing inflationary pressures. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
A lower repo rate is also expected to lead to a somewhat weaker exchange rate and thus to higher prices for imported goods and higher inflation. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
The repo-rate path entails the repo rate remaining at −0.10 per cent until CPIF inflation is close to 2 per cent. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
The assessment is that it will not be appropriate to begin increasing the repo rate until the second half of 2016. | 12/02/2015 | Feb-15 | par_body | null | null | null | hawkish |
CPIF inflation will then be close to 2 per cent, GDP growth will have been relatively high for just over a year and unemployment will have been falling for some time. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
The repo rate will thereafter increase gradually and reach 1.4 per cent at the start of 2018. | 12/02/2015 | Feb-15 | par_body | null | null | null | hawkish |
This is a very low repo rate at a time when economic activity is good, resource utilisation is close to its normal level and CPIF inflation is in line with the inflation target. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Both the nominal and the real repo rate are lower than was forecast in the December Monetary Policy Update (see Figures 1:29 and 1:30). | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
When the repo rate is close to its lower bound, monetary policy can be made more expansionary by purchasing government bonds. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
The Riksbank will soon make such purchases to a value of SEK 10 billion. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
This measure also contributes to making monetary policy more expansionary. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
If the need arises, the Riksbank is prepared to quickly purchase government bonds on a much larger scale. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
More expansionary monetary policy and readiness to do more | 12/02/2015 | Feb-15 | par_title | null | null | null | dovish |
The measures that the Riksbank is now taking in the form of a repo-rate cut, restored interest rates for fine-tuning transactions and the purchase of government bonds underlines the Riksbank's determination to safeguard the role of the inflation target as a nominal anchor for price setting and wage formation. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
In order to ensure that inflation rises towards the target, the Riksbank is prepared, should the need arise, to quickly make monetary policy more expansionary, even between the ordinary monetary policy meetings. | 12/02/2015 | Feb-15 | par_body | null | null | null | hawkish |
This will primarily entail making further repo-rate cuts, postponing the first repo-rate increase and increasing the purchases of government bonds. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
A programme for lending to companies through the banks may also be considered (see the article "The Riksbank’s complementary monetary policy measures"). | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Measures needed to dampen the risks linked to household indebtedness | 12/02/2015 | Feb-15 | par_title | null | null | null | neutral |
The expansionary monetary policy will continue to stimulate economic activity but also contribute to the continuation of the trends with rising housing prices and household indebtedness. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
This will increase the vulnerability of the Swedish economy. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
Finansinspektionen's proposal for an amortisation requirement is a step in the right direction, but is expected to only have marginal effects on household indebtedness. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Further measures are therefore required to reduce the risks. | 12/02/2015 | Feb-15 | par_body | null | null | null | hawkish |
It will be necessary to introduce such measures gradually and over a long period of time. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
The responsibility for this lies with other policy areas than monetary policy. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Conceivable measures include tightening the cap on loan-to-value ratios, restricting the percentage of mortgages at variable interest rates, adjusting tax relief, introducing minimum levels in the banks' discretionary income calculations and extending taxation of housing. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
In addition, measures that increase the supply of housing and lead to a more effective housing market are necessary. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Uncertainty over economic outlook and inflation prospects | 12/02/2015 | Feb-15 | par_title | null | null | null | neutral |
The international risk outlook has changed since December, with increased uncertainty about the development of economic activity and increased volatility on the financial markets. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
If the situation deteriorates in, for example, Greece, Russia or Ukraine, the contagion effects in the euro area and, ultimately, Sweden, may be greater than assumed in the main scenario. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
The krona exchange rate has continued to weaken since December. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
The krona is expected to remain at roughly its current level in the period immediately ahead and then to slowly strengthen in tradeweighted terms. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
However, the differences between the monetary policies conducted in different countries and regions and the ECB's extensive asset purchases make it unusually difficult to assess the exchange rate, and it cannot be ruled out that the krona will strengthen earlier and more rapidly than in the forecast. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
If so, this could mean that it will take longer before inflation rises towards the target. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Inflation is expected to rise gradually as economic activity strengthens in Sweden and abroad. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
The measures now taken will contribute to this by stimulating demand. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
However, several factors are creating uncertainty about how rapidly inflation will rise going forward. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
World-market prices for oil have fallen substantially over the last six months, which has led to lower energy prices. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
This will dampen inflation both directly via lower fuel and electricity prices and indirectly via lower price increases for other goods and services. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
It is difficult to determine the magnitude of these indirect effects and there is a risk that inflation will be lower than in the main scenario. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
It will be particularly serious if the low energy prices lead to a clear fall in inflation expectations among companies, households and the social partners. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
Such a scenario is discussed in Chapter 2 of this report, in which lower long-term inflation expectations lead to inflation rising at a significantly slower rate than in the main scenario and monetary policy therefore needs to be made even more expansionary. | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
Housing prices are rising rapidly. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
Although in the forecast the rate of price increases slows down somewhat in the forecast, housing prices are nevertheless expected to increase much more rapidly than household disposable incomes in the years immediately ahead. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
The ratio between household debts and disposable incomes is also increasing. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
A continuing upward trend in the debt ratio entails a risk that the economy will develop in a way that is not sustainable in the long run. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
If households were to rapidly reduce their debts for one reason or another, this could have a substantial impact on demand and unemployment. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
This could also give rise to persistent difficulties in stabilising inflation around the inflation target. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
The measures taken show that the Riksbank is ready to act quickly when necessary, even between the ordinary monetary policy meetings, to make monetary policy even more expansionary and ensure that inflation rises towards the target (see the article "The Riksbank’s complementary monetary policy measures"). | 12/02/2015 | Feb-15 | par_body | null | null | null | dovish |
This chapter presents two alternative scenarios for the development of the economy, and the possible direction for monetary policy if they were to become a reality. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | neutral |
The price of oil on the world market has roughly halved since June 2014. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | negative |
The price fall is judged to be mainly due to an increased supply of oil and is therefore expected to contribute towards boosting the recovery in Sweden and abroad. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | positive |
However, the effects will be uncertain and Sweden's GDP is deemed to be moderately affected in the main scenario. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | neutral |
In a more favourable scenario, the fall in the oil price has greater positive effects on GDP growth. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | positive |
Inflation will then also be slightly higher than in the main scenario but, as inflation is low to start with, there is still scope for monetary policy to defer interest rate increases. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | neutral |
The fall in the price of oil is having a dampening effect on inflation in Sweden. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | negative |
How much inflation will be dampened depends, among other things, on how inflation expectations are affected. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | neutral |
When inflation is already low to start with, and has been so for a long period, there is a risk that the low oil price will spill over into even lower inflation expectations. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | neutral |
In such a scenario, it will take a longer time for CPIF inflation to reach 2 per cent and monetary policy will then have to be even more expansionary. | 12/02/2015 | Feb-15 | sec_sum | null | null | null | dovish |
Oil prices | 12/02/2015 | Feb-15 | par_title | null | null | null | neutral |
The price of oil has fallen by approximately 50 per cent since June 2014. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
The main scenario assumes that the fall in prices over the last six months is largely due to an increase in the supply of oil. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
In addition, weaker global growth has contributed towards the global demand for oil successively being revised downwards. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
All else being equal, the fall in prices is contributing to a lower inflation forecast. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
And, as an increase in the supply of oil is considered to be the most important cause of the fall in prices, it is also contributing towards a positive effect on GDP growth. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
Uncertainty over the development of the oil price in the period ahead is considerable. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
For example, if the price of oil rises rapidly again, the effects on inflation will be temporary. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
If, on the other hand, oil prices fall further from their current level, this will contribute to even lower inflation. | 12/02/2015 | Feb-15 | par_body | null | null | null | negative |
Here, however, we disregard this uncertainty over the development of oil prices. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Instead, we focus on the difficulties involved in assessing how a certain fall in oil prices affects the Swedish economy. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
One difficulty lies in estimating the relative significance of the various driving forces behind the fall in the price of oil. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
How large a part of this fall in prices is due to an increased supply of oil and how much is due to worsened global growth prospects? | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
Another difficulty lies in determining the scale of the effects that an increased supply of oil, for example, has on GDP growth and inflation. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
A comparison of a number of different studies of these effects reveals a relatively wide range of results. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
The first alternative scenario illustrates that the real economic effects of a fall in oil prices caused by an increase in the supply of oil are uncertain. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
The main scenario assumes that the scale of these effects is fairly moderate. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
A long-lasting price fall of 10 per cent is judged to imply that the GDP level in the long term will be about 0.1 percentage points higher. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
The alternative scenario instead assumes a greater positive effect on GDP. | 12/02/2015 | Feb-15 | par_body | null | null | null | positive |
However, inflation is affected to a fairly small extent in the scenario and monetary policy therefore needs not react. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
The second alternative scenario illustrates that the effects on inflation expectations and inflation are uncertain. | 12/02/2015 | Feb-15 | par_body | null | null | null | neutral |
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