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4.2
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Monetary policy November 2023 Inflation is still too high and there are still risks that it will not continue falling fast enough and stabilise at the target.
23/11/2023
Nov-23
sum
Intro
0
null
negative
But inflation has fallen and inflationary pressures have clearly eased.
23/11/2023
Nov-23
sum
Intro
0
null
positive
The Executive Board has decided to hold the policy rate unchanged at 4 per cent.
23/11/2023
Nov-23
sum
Intro
0
null
hawkish
The Executive Board assesses that monetary policy needs to remain contractionary and is prepared to raise the policy rate further if inflation prospects deteriorate.
23/11/2023
Nov-23
sum
Intro
0
null
hawkish
Monetary policy has contributed to inflationary pressures in the Swedish economy being on their way down: the short-term rate of increase in consumer prices is lower than before and companies are making downward adjustments to their plans to raise prices.
23/11/2023
Nov-23
sum
Intro
0
null
positive
However, inflation remains too high and there are still risks that it will not fall fast enough going forward.
23/11/2023
Nov-23
sum
Intro
0
null
negative
Prices for services are increasing at a rapid pace and contributing significantly to total inflation.
23/11/2023
Nov-23
sum
Intro
0
null
negative
In addition, the krona is still unjustifiably weak, which is holding up the rate of price increase for goods.
23/11/2023
Nov-23
sum
Intro
0
null
negative
As a result of the implemented policy rate hikes, demand in the Swedish economy is slowing down.
23/11/2023
Nov-23
sum
Intro
0
null
negative
The slowdown of the economy is now also beginning to reach the labour market.
23/11/2023
Nov-23
sum
Intro
0
null
negative
GDP is expected to continue falling for some time to come, at the same time as developments in the labour market slow down somewhat further.
23/11/2023
Nov-23
sum
Intro
0
null
negative
The lower activity in the Swedish economy, together with an expected strengthening of the krona exchange rate, will contribute to inflation falling towards the target during the course of next year.
23/11/2023
Nov-23
sum
Intro
0
null
neutral
The forecast for the policy rate is that it may be raised further at the start of next year and that monetary policy needs to be contractionary for a relatively long period of time for inflation to fall back and stabilise close to the target of 2 per cent.
23/11/2023
Nov-23
sum
Intro
0
null
hawkish
New information and how it is assessed to affect the economic outlook and inflation prospects will be decisive in determining the monetary policy stance.
23/11/2023
Nov-23
sum
Intro
0
null
neutral
Inflation is approaching the target but is still too high
23/11/2023
Nov-23
sec_title
null
1
null
negative
Tight monetary policy abroad is contributing to inflation continuing to fall back from last year’s peak levels.
23/11/2023
Nov-23
sec_sum
null
null
null
negative
Central banks are allowing monetary policy to act by holding their policy rates at contractionary levels but are at the same time keeping the door open for further rate rises.
23/11/2023
Nov-23
sec_sum
null
null
null
hawkish
Inflation is also falling in Sweden, roughly in line with the Riksbank’s previous assessment.
23/11/2023
Nov-23
sec_sum
null
null
null
neutral
Monetary policy has dampened demand in the Swedish economy and is contributing to a slowdown in inflationary pressures.
23/11/2023
Nov-23
sec_sum
null
null
null
negative
In recent months, consumer prices have increased at a slower pace than before and companies are adjusting their plans for price increases.
23/11/2023
Nov-23
sec_sum
null
null
null
negative
The labour market is weakening from a strong starting point.
23/11/2023
Nov-23
sec_sum
null
null
null
negative
However, inflation is still too high and there are still risks that it will not fall fast enough going forward.
23/11/2023
Nov-23
sec_sum
null
null
null
negative
Prices for services are increasing at a rapid pace and contributing significantly to total inflation.
23/11/2023
Nov-23
sec_sum
null
null
null
negative
In addition, the krona is still unjustifiably weak, which is holding up the rate of price increase for goods.
23/11/2023
Nov-23
sec_sum
null
null
null
negative
All in all, the Executive Board assesses that monetary policy needs to remain contractionary, but that it is appropriate now to hold the policy rate unchanged.
23/11/2023
Nov-23
sec_sum
null
null
null
hawkish
The Executive Board has therefore decided to allow the policy rate to remain at 4 per cent, but is prepared to raise it further if the prospects for inflation deteriorate.
23/11/2023
Nov-23
sec_sum
null
null
null
hawkish
The forecast for the policy rate is that it may be raised further at the start of next year and that monetary policy needs to be contractionary for a relatively long period of time for inflation to fall back and stabilise close to the target of 2 per cent.
23/11/2023
Nov-23
sec_sum
null
null
null
hawkish
New information and how it is assessed to affect the economic outlook and inflation prospects will be decisive in determining the monetary policy stance.
23/11/2023
Nov-23
sec_sum
null
null
null
neutral
Increasingly clear signs that inflation is falling.
23/11/2023
Nov-23
sub_sec_title
null
1.1
null
positive
Weak growth in Sweden is starting to make an impression on the labour market.
23/11/2023
Nov-23
par_title
null
null
null
negative
In Sweden, too, developments in the real economy have been in line with the Riksbank’s forecast.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Growth is low, much due to demand being subdued by the parts of the economy that are sensitive to interest rates, such as household consumption and housing investment (see Figure 3).
23/11/2023
Nov-23
par_body
null
null
null
negative
However, the Swedish household’s demand has nevertheless slowed down much further (see left-hand image in Figure 3).
23/11/2023
Nov-23
par_body
null
null
null
negative
This reflects their high sensitivity to interest rates.
23/11/2023
Nov-23
par_body
null
null
null
neutral
But in other parts of the economy, such as the export sector, demand is slowing down in the wake of weaker economic activity abroad.
23/11/2023
Nov-23
par_body
null
null
null
negative
As in the euro area and United States, the labour market in Sweden has long succeeded in withstanding the falling growth.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Employment has been stronger than forecasts by the Riksbank for some time.
23/11/2023
Nov-23
par_body
null
null
null
positive
However, signs that the economic downturn is having an impact on the Swedish labour market are now becoming increasingly visible.
23/11/2023
Nov-23
par_body
null
null
null
negative
Employment is still at a historically high level, but unemployment has started to rise at the same time as indicators are suggesting some further increase in the near term (see also the description in Chapter 3).
23/11/2023
Nov-23
par_body
null
null
null
negative
Inflationary pressures easing in the Swedish economy but still too high
23/11/2023
Nov-23
par_title
null
null
null
negative
There are clear indications that inflationary pressures are easing in the Swedish economy.
23/11/2023
Nov-23
par_body
null
null
null
positive
Measured as the CPIF excluding energy, inflation amounted to 6.1 per cent in October, which can be compared with 6.9 per cent in September and the peak levels of around 9 per cent at the start of the year.
23/11/2023
Nov-23
par_body
null
null
null
negative
CPIF inflation has fallen faster, from the peak levels of around 10 per cent at the end of 2022, to 4.2 per cent in October.
23/11/2023
Nov-23
par_body
null
null
null
positive
The gap between the different measures of inflation becomes even clearer if we examine their contributions to the price increases (see Figure 4).
23/11/2023
Nov-23
par_body
null
null
null
neutral
This shows that, for some time, energy prices have made a significantly negative contribution, while other components continue to make large positive contribution to total inflation.
23/11/2023
Nov-23
par_body
null
null
null
negative
This applies in particular to prices of services.
23/11/2023
Nov-23
par_body
null
null
null
negative
One way of obtaining a picture of current price developments is to look at changes over a shorter period of time than 12 months.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Figure 5 shows the price changes over three months, calculated as an annual rate.
23/11/2023
Nov-23
par_body
null
null
null
neutral
The left-hand image shows a comparison of the CPIF and the CPIF excluding energy.
23/11/2023
Nov-23
par_body
null
null
null
neutral
The pattern is similar to that for the twelve-month figures, but also differs in some respects.
23/11/2023
Nov-23
par_body
null
null
null
neutral
The rate of increase in the CPIF had already peaked by the middle of last year, after which it dropped sharply to the current level of just above the inflation target.
23/11/2023
Nov-23
par_body
null
null
null
positive
The rate of increase in the CPIF excluding energy is more sluggish and peaked at the beginning of the current year, after which it fell, to around the same level as CPIF inflation as a whole, that is just above 2 percent.
23/11/2023
Nov-23
par_body
null
null
null
neutral
The rate of increase on both services and goods has declined considerably from the peak levels (see right-hand image in Figure 5).
23/11/2023
Nov-23
par_body
null
null
null
negative
This development gives cause for optimism, but needs to continue for inflation to fall back towards the target within a reasonable period of time.
23/11/2023
Nov-23
par_body
null
null
null
positive
Further discussion of short-term rates of price increase can be found in Chapter 3.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Companies' price plans are another important indicator of inflationary pressures in the economy.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Measurements of these are made in both the National Institute of Economic Research's Economic Tendency Survey and the Riksbank's own Business Survey.
23/11/2023
Nov-23
par_body
null
null
null
neutral
According to the Economic Tendency Survey, price plans among companies in the retail trade are somewhat higher than normal (see left-hand image in Figure 6).
23/11/2023
Nov-23
par_body
null
null
null
neutral
The Riksbank’s Business Survey shows a more marked change in price plans among the household-related companies (see right-hand image in Figure 6).
23/11/2023
Nov-23
par_body
null
null
null
negative
When inflation started to rise in Sweden, the proportion of household-related companies planning price rises also increased.
23/11/2023
Nov-23
par_body
null
null
null
neutral
But in the two latest surveys, this proportion has fallen substantially.
23/11/2023
Nov-23
par_body
null
null
null
neutral
In the most recent survey, the proportion of companies planning to raise prices over the next year is lower than the proportion of companies planning to cut them.
23/11/2023
Nov-23
par_body
null
null
null
neutral
There are a couple of possible explanations for the differences between the Economic Tendency Survey and the Riksbank’s Business Survey.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Firstly, the Economic Tendency Survey refers to price plans three months ahead, while the Business survey refers to plans for the coming year.
23/11/2023
Nov-23
par_body
null
null
null
neutral
And secondly, the Economic Tendency Survey covers a lot more companies than the Business survey.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Although the picture is not entirely unambiguous, it can be concluded that companies have now adjusted their price plans downwards quite significantly.
23/11/2023
Nov-23
par_body
null
null
null
negative
Long-term inflation expectations have also been stable in recent years, too, when inflation has reached double figures (see Figure 7).
23/11/2023
Nov-23
par_body
null
null
null
neutral
This is a sign that the inflation target enjoys a high level of credibility.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Short-term expectations rose in 2021 and 2022 in step with the measured rate of inflation, but have been falling for a while.
23/11/2023
Nov-23
par_body
null
null
null
negative
One year ahead, expectations among both companies and money market participants are close to 2 per cent.
23/11/2023
Nov-23
par_body
null
null
null
positive
Households’ expectations tend to be higher than actual inflation, which may reflect the fact that they tend to focus more on prices that are rising than those that are unchanged or falling (see Figure 7).
23/11/2023
Nov-23
par_body
null
null
null
neutral
The krona’s development is increasing uncertainty over the development of inflation
23/11/2023
Nov-23
par_title
null
null
null
negative
Since September, the krona exchange rate has strengthened considerably but it is still very weak from a historical point of view.
23/11/2023
Nov-23
par_body
null
null
null
negative
The Riksbank assesses that, during the period of high inflation, companies have transferred cost increases from, for instance, electricity and input goods, to consumer prices to a greater extent than previously.
23/11/2023
Nov-23
par_body
null
null
null
neutral
This probably also applies to costs for imported goods related to the weak krona.
23/11/2023
Nov-23
par_body
null
null
null
negative
In comparison with the euro area, underlying inflation is falling more slowly in Sweden, which is likely connected with the depreciation of the krona against the euro (see the article “The pass-through of the krona to inflation appears to be larger than usual”).
23/11/2023
Nov-23
par_body
null
null
null
negative
If the krona depreciates more than expected going forward, at the same time as the pass-through to inflation is large, this would increase the risk that inflation will not fall back in line with the Riksbank’s forecast.
23/11/2023
Nov-23
par_body
null
null
null
negative
This could justify a tighter monetary policy.
23/11/2023
Nov-23
par_body
null
null
null
hawkish
There is in general considerable uncertainty over the krona exchange rate and its effect on inflation.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Continued contractionary monetary policy
23/11/2023
Nov-23
sub_sec_title
null
1.2
null
hawkish
Policy rate held unchanged at 4 per cent
23/11/2023
Nov-23
par_title
null
null
null
hawkish
Inflation abroad has fallen further since September and is approaching the central banks’ targets.
23/11/2023
Nov-23
par_body
null
null
null
positive
However, underlying inflation is falling at a slower pace.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Inflation is also falling in Sweden, roughly in line with the Riksbank’s previous assessment.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Monetary policy has dampened demand in the Swedish economy and is contributing to a slowdown in inflationary pressures.
23/11/2023
Nov-23
par_body
null
null
null
negative
In recent months, consumer prices have increased at a slower pace than before, and companies no longer plan to raise prices as much.
23/11/2023
Nov-23
par_body
null
null
null
negative
The labour market is weakening from a strong starting point.
23/11/2023
Nov-23
par_body
null
null
null
negative
However, inflation is still too high and there are still risks that it will not fall fast enough going forward.
23/11/2023
Nov-23
par_body
null
null
null
negative
Prices for services are increasing at a rapid pace and contributing significantly to total inflation.
23/11/2023
Nov-23
par_body
null
null
null
negative
In addition, the krona is still unjustifiably weak, which is holding up the rate of price increase for goods.
23/11/2023
Nov-23
par_body
null
null
null
negative
All in all, the policy rate therefore needs to remain at contractionary level for inflation to continue falling.
23/11/2023
Nov-23
par_body
null
null
null
hawkish
The Executive Board deems it appropriate now to hold the policy rate unchanged at 4 per cent, but is prepared to raise it further if the prospects for inflation deteriorate.
23/11/2023
Nov-23
par_body
null
null
null
hawkish
The forecast for the policy rate is that it may be raised further at the start of next year and that monetary policy needs to be contractionary for a relatively long period of time for inflation to fall back and stabilise close to the target of 2 per cent (see Figure 8).
23/11/2023
Nov-23
par_body
null
null
null
hawkish
However, there is still considerable uncertainty, and new information and how it is assessed to affect the economic outlook and inflation prospects will be decisive in determining the monetary policy stance.
23/11/2023
Nov-23
par_body
null
null
null
neutral
The fact that inflation and monetary policy can develop in a different way than forecast is illustrated in the alternative scenarios in Section 1.4.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Over the past year, inflation has reached its highest level in over 30 years.
23/11/2023
Nov-23
par_body
null
null
null
negative
High inflation has a negative effect on the whole economy, but is particularly problematic for households with small margins.
23/11/2023
Nov-23
par_body
null
null
null
neutral
Consequently, the Riksbank attaches great weight to returning inflation to the target within a reasonable period of time.
23/11/2023
Nov-23
par_body
null
null
null
hawkish
Low and stable inflation makes it easier for households and companies to plan ahead and creates good conditions for social partners to continue using the inflation target as anchor in wage formation.
23/11/2023
Nov-23
par_body
null
null
null
neutral
The fact that inflation is falling towards the target enables a return to real wage growth and increases households’ purchasing power.
23/11/2023
Nov-23
par_body
null
null
null
positive