Excerpts from the Statement by the Executive Board of the Riksbank:
The expansionary monetary policy is having a positive impact on the Swedish economy and inflation has begun to rise. To ensure this development continues, the Executive Board of the Riksbank has decided to purchases government bonds for a further SEK 40-50 billion. In addition, the repo-rate path has been lowered significantly compared with the decision in February. The repo rate has been left unchanged at −0.25 per cent but may be cut further. Slow increases in the repo rate are not expected to begin until the second half of 2016. These measures and the readiness to do more underline that the Riksbank is safeguarding the role of the inflation target as a nominal anchor for price setting and wage formation.
Economic activity abroad continues to slowly improve. Although the development of economic activity abroad continues to be uncertain, the recovery in the euro area appears to be on firmer ground. GDP growth in Sweden is good and the labour market is continuing to improve.
To support the positive development and ensure that inflation rises sufficiently quickly, the Executive Board of the Riksbank has decided to extend the purchases of nominal government bonds by a further SEK 40-50 billion. The purchases will be made during the period from May to the end of September and will comprise maturities of up to 25 years. The purchases decided on by the Riksbank to date thus comprise SEK 80-90 billion. At the same time, the repo-rate path has been lowered significantly compared with the decision in February. Slow increases in the repo rate from −0.25 per cent are not expected to begin until the second half of 2016. The repo-rate path also reflects the fact that it is possible to cut the repo rate further.
Monetary policy reflects the fact that the Riksbank's tolerance for low inflation is very limited. The Riksbank is still highly prepared to make monetary policy even more expansionary if necessary, even between the ordinary monetary policy meetings. The purchases of government bonds can be extended. Moreover, the repo rate can be cut further and future increases can be implemented more slowly. The Riksbank is also prepared to launch a programme for loans to companies via the banks and to intervene on the foreign exchange market if the upturn in inflation is threatened as the result, for instance, of a very troublesome market development. Purchases of other assets than government bonds are also a possibility.
The decision on the repo rate will apply with effect from 6 May. The minutes from the Executive Board's monetary policy discussion will be published on 12 May.