Press release The Riksbank’s interest rate increases have contributed to the previously high inflation falling. But aside from energy prices, inflation is still too high and there is a risk of a setback. The board has decided to leave the policy rate unchanged at 4 percent. A tightening monetary policy is still deemed necessary for inflation to stabilize close to the target. At the same time, the executive board now assesses that there is less risk of inflation getting stuck at excessively high levels. The policy rate can therefore probably be lowered earlier than was indicated in the forecast in November.
Continued tightening monetary policy for low and stable inflation
The Riksbank’s interest rate increases have contributed to lower inflationary pressure and that inflation expectations are well anchored at the inflation target of 2 percent. In November and December, inflation continued to fall, and measured by CPIF excluding energy, it was lower than expected. Indicators suggest that inflationary pressure will continue to moderate in the future.
The board has decided to leave the policy rate unchanged at 4 percent. A tightening monetary policy is still deemed necessary for inflation to stabilize close to the target.
The inflation trend on firmer ground
At the same time, the executive board assesses that there is less risk of inflation getting stuck at excessively high levels. After a longer period when inflation was significantly higher than expected, inflation has recently instead fallen in line with the Riksbank’s forecasts. This creates greater security in the inflation assessment. Activity in the Swedish economy has moderated and inflation has fallen significantly. In addition, inflation expectations are close to the target and wages are increasing at a moderate rate. The policy rate can therefore probably be lowered earlier than was indicated in the forecast in November. If the outlook for inflation continues to be favorable, it is not out of the question that the policy rate could be lowered during the first half of this year.
Risk of setback – monetary policy needs to be adjusted with caution
There are thus conditions for low and stable inflation. But the executive board also emphasizes that there are risks that could cause inflation to rise again, for example new supply disruptions as a result of the geopolitical unrest, that companies’ pricing behavior has not yet normalized or that the krona weakens sharply again. Monetary policy therefore needs to be adjusted with caution to ensure that inflation is permanently stabilized around the target. New information and how it is judged to affect the economic and inflation outlook is decisive for how monetary policy will be designed.
As part of the normalization of the Riksbank’s balance sheet, the Executive Board has also decided to increase sales of nominal government bonds from SEK 4.2 to 5.7 billion per month from February this year. In total, the sales rate thus increases from SEK 5 to 6.5 billion per month.
No new forecasts in February
In connection with the announcement, a shorter Monetary Policy Update is published which contains the Executive Board’s assessment of how new information affects the economic outlook and monetary policy. There are no new forecasts in the update. The next monetary policy report with forecasts will be published on March 27.
The decision on the key interest rate applies from 7 February. The minutes from the executive board’s monetary policy meeting will be published on 7 February. A press meeting with Riksbank governor Erik Thedéen and Åsa Olli Segendorf, head of the department for monetary policy, will be held today at 11:00 at the Riksbank. To participate, a press ID or equivalent is required. The press conference is broadcast live on riksbank.se.
Contact: Press service 08-787 02 00
Updated 02/01/2024