Monetary policy decision September 2018 If the economy develops as - PowerPoint PPT Presentation

Monetary policy decision September 2018

If the economy develops as expected, there will soon be scope to slowly reduce the support from monetary policy

Good Swedish economic activity Growth higher than historical average Unemployment has fallen Annual percentage change and per cent of labour force, respectively. Source: Statistics Sweden

Inflation on target 3 3 CPIF 2 2 1 1 0 0 -1 -1 11 13 15 17 Annual percentage change. Source: Statistics Sweden

Inflation on target – energy prices providing a boost 3 3 Energy prices’ contribution to the CPIF CPIF 2 2 1 1 0 0 -1 -1 11 13 15 17 Annual percentage change and percentage points, respectively. Sources: Statistics Sweden and the Riksbank

Inflation to fall back when energy prices slow down 3 3 Energy prices’ contribution to the CPIF CPIF 2 2 Contribution from energy prices set to decrease 1 1 0 0 -1 -1 11 13 15 17 19 21 Annual percentage change and percentage points, respectively. The Sources: Statistics Sweden and the Riksbank contribution of energy prices to the CPIF in the forecast is calculated as the annual percentage change in energy prices multiplied by its current weight.

Moderate inflationary pressures 5 5 CPIF, July outcome 4 4 3 3 2 2 1 1 0 0 -1 -1 01 04 07 10 13 16 Annual percentage change. The field shows the highest and lowest Sources: Statistics Sweden and the Riksbank outcome for different measures of underlying inflation

Swedish economic activity still strong but continued high pressure on the labour Slightly slower growth market Annual percentage change and per cent of population, 15-74 years, Sources: Statistics Sweden and the Riksbank respectively.

Good global growth Favourable economic activity abroad Slowly rising inflationary pressures Expansionary monetary policy But trade conflicts and economic policy problems creating uncertainty

The krona has weakened Weaker krona Stronger krona Index, 18 November 1992 = 100. Outcomes are daily data and forecasts refer Sources: National sources and the Riksbank to quarterly averages. The KIX is an aggregate of exchange rates in countries important for Sweden's international transactions.

Monetary policy needs to proceed cautiously Temporary factors keeping up inflation, inflationary pressures remain moderate Too early to increase the interest rate now Good prospects for rising inflationary pressures If economy develops as expected, soon scope to slowly reduce support Need to be vigilant about inflationary pressures

Continued expansionary monetary policy Repo rate -0,50 per cent Government bond purchases 80 80 Reinvestments of coupons Reinvestment of principal payments 70 70 New purchases 60 60 50 50 40 40 30 30 20 20 10 10 0 0 H1 H2 H1 H2 H1 H2 H1 H2 H1 2015 2015 2016 2016 2017 2017 2018 2018 2019 Per cent and nominal amount, SEK billion. The development of Source: The Riksbank reinvestments from mid-2018 onwards is a forecast and refers to nominal amounts. The final amounts will depend on current market prices.

If the economy develops as expected, there will soon be scope to slowly reduce the support from monetary policy