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Sveriges Riksbank: Minutes of Monetary Policy Meeting 20 April 2016

At its monetary policy meeting on 20 April, the Executive Board of the
Riksbank decided to purchase government bonds for a further SEK 45
billion during the second half of 2016. The purchases include both
nominal and real government bonds, corresponding to SEK 30 and SEK 15
billion, respectively. The repo rate was held unchanged at -0.50 per
cent. There is still a high level of preparedness to make monetary
policy even more expansionary if this is needed to safeguard the
inflation target.

It was noted at the meeting that the Executive Board agreed on the
picture of economic prospects and the inflation outlook described in
the draft Monetary Policy Report.

Several members mentioned risks linked to uncertainty on the financial
markets and to economic prospects abroad. The members also noted that
international inflation is low and that several central banks are
expected to conduct very expansionary monetary policy.

In Sweden, resource utilisation is currently close to normal, and
economic activity is expected to continue to strengthen. Inflation
has been slightly higher in recent months than the forecast in
February. But although the forecast for inflation has been revised up
slightly for the next few months, it is expected to be lower than the
target for 2016, too.

The Executive Board agrees that monetary policy needs to continue to
be very expansionary. However, the members have slightly different
views as to whether it is appropriate to extend the government bond
purchasing programme.

On the one hand, the Swedish economy is characterised by high growth
and an ever-stronger labour market, and inflation has been higher
than expected for several months. Rising resource utilisation also
creates good conditions for a continuation of the upward trend in
inflation. This may be an argument for not prolonging government bond

On the other hand, the upturn in inflation is uneven and to a high
degree has been driven by a weak krona. A continued positive economic
development in Sweden is therefore needed to safeguard the upward
trend in inflation. At the same time, uncertainty in the wider world
remains and several central banks are conducting a very expansionary
monetary policy. The inflation forecast is thus highly sensitive to
various international factors. This is an argument for extending the
government bond purchasing programme to mitigate the risk of the
krona appreciating too quickly, which would lead to weaker demand for
Swedish exports and lower inflation.

A majority of the Board members considered it appropriate to continue
buying government bonds for a further SEK 45 billion during the
second half of 2016. To achieve a broad impact on different interest
rates, the purchases should include both nominal and real government
bonds corresponding to SEK 30 billion and SEK 15 billion
respectively. Until further notice, maturities and coupons from the
portfolio of both nominal and real government bonds will be
reinvested. One board member considered that monetary policy is
sufficiently expansionary for inflation to rise towards 2 per cent,
and that it is therefore unnecessary to extend the purchases of
government bonds.

The Executive Board was unanimous in holding the repo rate at -0.50
per cent, and, as in February, expects to begin raising the interest
rate slowly in mid-2017.

The Executive Board is also unanimous as regards having a high level
of preparedness to make monetary policy even more expansionary, even
between ordinary monetary policy meetings, if this is needed to
safeguard confidence in the inflation target.

Press office tel. 46 8 787 0200


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