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Riksbank policy makers look intent on bringing an end to almost half a decade of negative interest rates, according to minutes from their most recent meeting.
The central bank earlier this month delivered an upbeat assessment of the economy and signaled a plan to raise rates toward the end of the year or early next year. The move came amid growing uncertainty over the global economy, which is weighing heavily on export-dependent Sweden.
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“Several members emphasized that even though the Riksbank can’t act independently of global developments, in many respects Sweden is in a more favorable situation compared with other countries, with continued reasonably strong economic activity and inflation that has been close to target for some time,” the bank said. “The Riksbank therefore has slightly greater degrees of freedom than previously to deviate from monetary policy abroad.”
As expected, Deputy Governor Per Jansson had major doubts about continuing to signal a rate increase. The upbeat minutes were clouded by a key report, which showed unemployment unexpectedly rose to 7.4% in August.
Key Comments:
| Governor Stefan Ingves: |
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| “The aim was to bring up inflation to the target, and we have also succeeded in doing so – inflation has developed in line with the target for several years now. A negative interest rate and substantial bond purchases may seem odd but generally speaking, Sweden has experienced good times and monetary policy has contributed to this.” |
| Deputy Governor Henry Ohlsson | |
|---|---|
| “The Swedish economy is continuing to demonstrate a high level of activity, higher than in the euro area, for example. Inflation is on target. In Sweden, we can conduct our own monetary policy and there are good reasons at present to take advantage of this possibility. At the same time, there is no avoiding that, in the slightly longer term, there is reason not to push on as rapidly with the approaching rate rises that previously adopted repo rate paths have indicated.” |
| Deputy Governor Cecilia Skingsley |
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| “Economic activity is moving, as expected, into a calmer phase. Inflation is close to target. Consequently, it seems reasonable to maintain the current direction for monetary policy over the next six months and to raise the repo rate towards the end of the year or at the start of next year. However, at the same time, I have the impression that developments abroad will be contingent on a more expansionary monetary policy over a longer period, to which Swedish monetary policy will also need to adjust to some extent.” |
| Deputy Governor Martin Floden: |
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| “My assessment is thus that conditions are in place to take a further step away from the very lowest interest rate levels soon. However, after this increase, I think that it will be appropriate to hold the rate steady until we see clear signs that economic activity and/or inflationary pressures have strengthened again.” |
| Deputy Governor Per Jansson |
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| “I choose today not to formally enter a reservation against the monetary policy in the draft Monetary Policy Report. That I am not doing so has to do with the facts that the increase of the repo rate has not yet been decided, but is merely a forecast of how we think we will act in a few months’ time, and that I think that the repo rate path otherwise is reasonable.” |
First Deputy Governor Kerstin af Jochnich participated at her last meeting. She found that policy now “strikes a reasonable balance.”
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