Riksbankers Promise Cautious Way Out of Negative Interest Rates

(Bloomberg) -- Cautious, is the word for Sweden’s central bank.

The Riksbank in December raised rates for the first time in seven years, increasing its benchmark to minus 0.25 percent, and flagging another increase later this year. One member of the board, Deputy Governor Per Jansson, argued in favor of keeping rates unchanged.

Minutes from the December meeting released on Wednesday showed that other policy makers were also pondering holding off on raising and pledged a cautious approach to tightening after years of extreme monetary policy.

Following are the key comments from the minutes of last month’s rate meeting.

The Majority:

Governor Stefan Ingves:
“It is a question of cautious and slow increases in the repo rate. In my assessment, and as things look at present, the next rise will not be until the second half of 2019. In my opinion, this is, all things considered, a continuation of the monetary policy we have been discussing for a long time.”
Deputy Governor Kerstin af Jochnick
“The somewhat lower path in relation to October reflects continued uncertainty regarding the strength of inflationary pressures and a need to proceed with caution regarding rate increases. If developments do not prove to be as we have forecast, we will need to review the repo-rate path.”
Deputy Governor Martin Floden 
“It is worrying that the inflationary pressure has remained weak for a long time, despite the high level of resource utilisation and the expansionary monetary policy. The surprisingly low inflation outcomes in recent months amplify this worry. It is clear that inflation still needs a lot of support from an expansionary monetary policy and that rate rises in the period ahead must not be too rapid.”
Deputy Governor Cecilia Skingsley
“International risks could justify waiting with today’s rate rise, but inflation tends to come late in the economic cycle and sometimes with surprising strength. Combined with our overall forecast, I consider the balance to be in favour of an increase today. An increase today can also be evaluated properly before there is justification for another increase in line with the forecasts. If the outlook for inflation were to change significantly, I would support adjusting the timing and scope of the forecasted increases.”
Deputy Governor Henry Ohlsson
“The forecast for inflation in the draft Monetary Policy Report also shows continuing good target attainment. This is the decisive argument for me that it is time – yes high time – to start raising the repo rate. After accelerating and reaching marching speed, we can now take our foot off the gas a little.”

The Dissenter

Deputy Governor Per Jansson 
“The conclusion I draw from the new inflation outcomes and proposals to revise the forecast for future inflation is that there is at present no urgent need to raise the repo rate. This conclusion is strengthened by my belief that the downside risks dominate with regard to the prospects for inflation in both the shorter and, above all, the slightly longer perspective.”

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