Transcript Monetary Policy Report 2008:1

Monetary Policy
Report 2008:1
13 February 2008



Repo rate raised by 0.25 percentage
points to 4.25 per cent to attain the
inflation target
A repo rate around 4.25 procent over the
coming year
The Riksbank’s view of the future repo
rate path remains largely the same as in
December
Repo rate raised


Good economic activity in Sweden
High cost pressures – inflation exceeds
the target
Good economic activity
Deviation from the trend, per cent
5
5
Hours worked
Employment
GDP
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
-4
-4
-5
-5
81
83
85
87
89
91
93
Note. Percentage deviation from the HP trend.
95
97
99
01
03
05
07
09
11
Sources: Statistics Sweden and the
Inflation exceeds the
target
Annual percentage change
4
4
CPI
CPIX
3
3
2
2
1
1
0
0
-1
-1
00
01
02
03
04
05
06
07
08
09
10
11
Sources: Statistics Sweden and the
Unit labour costs for the ecnomomy as a
whole
Annual percentage change, seasonally adjusted data
8
8
Unit labour costs
Hourly labour cost
Productivity
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
94
96
98
00
02
04
06
08
10
Sources: Statistics Sweden and the Riksbank
Inflation expectations have risen
Expected inflation in 2 years, per cent
4
4
Purchasing managers
Social partners
M oney market agents
3
3
2
2
1
1
0
0
96
97
98
99
00
01
02
03
04
05
06
07
08
Source: Prospera Research AB
Greater uncertainty


Financial turmoil
Subdued growth in the United States
Continued financial turmoil
The difference between interbank rates and government bond rates, basis
points
250
200
250
Euro area (Germany)
Sweden
USA
UK
200
150
150
100
100
50
50
0
Jan-07
0
Apr-07
Jul-07
Oct-07
Note. Refers to the difference between 3-month interbank rates and 3-month
Jan-08
Source: The Riksbank
Falling share prices
Index, 1 January 1999 = 100
220
220
OM X 30, Sweden
S&P 500, USA
DAX 30, Germany
200
200
180
180
160
160
140
140
120
120
100
100
80
80
60
60
40
40
99
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
Weak GDP growth in the United States in
2008
Consensus and the Riksbank’s forecasts for GDP growth in the
United States in 2008 on different occasions
4.0
4.0
The Riksbank
3.5
Consensus
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
Jan Feb M ar Apr M ay Jun
2007
Jul Aug Sep Oct Nov Dec Jan Feb
2008
Sources: Consensus Economics Inc. and the Riksbank
Good growth in the world as a
whole
GDP in the world and Sweden, annual percentage change
6
6
Sweden
The world
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
80
82
84
86
88
Note. Calendar-adjusted data.
90
92
94
96
98
00
02
04
06
08
10
Sources: IMF, Statistics Sweden and the Riksbank
Monetary policy
considerations
High cost pressures –
Inflation above the target
Financial turmoil
Subdued growth in the United States
Interest rate path

A repo rate around 4.25 per cent over the
coming year

Inflation close to the target at the end of next
year

Subdued economic activity in Sweden in the
future
Risks in the interest rate
forecast
+ Higher inflationary pressures from abroad
+ Higher wages and lower productivity
+ Higher food and energy prices
– Financial turmoil worsens
– Weaker international economic activity
Summary




Good economic activity in Sweden – high
cost pressures
Greater uncertainty – subdued growth in
the United States and financial turmoil
Interest rate raised to attain the inflation
target of 2 per cent
The Riksbank’s view of the future repo
rate path remains largely the same as in
December
The interest rate path is a forecast
and not a promise
Per cent, quarterly average
7
7
90%
75%
50%
Repo rate
6
6
5
5
4
4
3
3
2
2
1
1
0
0
Mar-03
M ar-04
Mar-05
M ar-06
Mar-07
M ar-08
Mar-09
M ar-10
Mar-11
Source: The Riksbank