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Monetary
Policy Report
2008:2


The repo rate is raised to 4.5 per cent
The repo rate needs to be raised further
during the course of the year
To meet the inflation target of two
per cent
Repo rate raised and interest
rate path adjusted upwards



Inflation is increasing more rapidly than
expected
Large increase in the oil price and
remaining at a high level
Inflation expectations too high
Monetary policy deliberations
Inflation above the
target
The oil price
Inflation expectations
Financial turbulence
Dampened growth
in Sweden and abroad
Repo rate raised and interest rate path
adjusted upwards
Per cent, quarterly average
6
6
M PR 2008:2
M PU April 2008
5
5
4
4
3
3
2
2
1
1
0
0
04
05
06
07
08
Note. Broken lines refer to the Riksbank’s forecasts
09
10
11
Source: The Riksbank
Inflation increasing more rapidly than
expected
CPI, annual percentage change
5
5
M PR 2008:2
M PU April 2008
4
4
3
3
2
2
1
1
0
0
-1
-1
00
01
02
03
04
Note. Broken lines refer to the Riksbank’s forecasts
05
06
07
08
09
10
11
Sources: Statistics Sweden and the Riksbank
Substantial increase in the oil price and
continued high level
USD per barrel
140
140
Oil price, outcome
120
120
Futures, up to and including 27 June
2008 (M PR 2008:2)
Futures, average up to and including 11
April 2008 (M PU April 2008)
Futures, average up to and including 16
January 2008 (M PR 2008:1)
100
80
100
80
60
60
40
40
20
20
0
0
00
01
02
03
04
05
06
07
08
09
10
11
Source: Intercontinental Exchange and the Riksbank
Inflation expectations too high
Different groups’ inflation expectations two years ahead
Annual percentage change
4
4
Purchasing managers
Social partners
M oney market participants
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
Continuing financial turmoil
Difference between interbank rates and expected policy rates, basis points
120
120
Sweden
Euro area
100
100
USA
UK
80
80
60
60
40
40
20
20
0
jan-07
0
apr-07
jul-07
okt-07
Note. The difference is calculated as the difference between the 3-month interbank
Rate and the 3-month overnight index swap.
jan-08
apr-08
jul-08
Sources: Reuters Ecowin and the Riksbank
Households are more pessimistic
Confidence indicators for households, net figures
40
120
Sweden (left scale)
Euro area (left scale)
30
110
USA (right scale)
20
100
10
90
0
80
-10
70
-20
60
-30
50
00
01
02
03
04
05
06
07
08
Sources: European Commisssion, Conference Board and National Institute of Economic Research
Weaker GDP growth in Sweden
Quarterly change in per cent, calculated at an annual rate, seasonally-adjusted data
7
7
GDP M PU April 2008
6
6
GDP M PR 2008:2
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
00
01
02
03
04
05
Note. Broken lines refer to the Riksbank’s forecasts
06
07
08
09
10
11
Sources: Statistics Sweden and the Riksbank
Employment has increased
strongly
Thousands of persons, seasonally-adjusted data
5000
5000
Employed (EU definition)
4800
4800
Employed (ILO definition)
4600
4600
4400
4400
4200
4200
4000
4000
3800
3800
80
82
84
86
88
90
92
94
Note. Broken lines refer to the Riksbank’s forecasts
96
98
00
02
04
06
08
10
Sources: Statistics Sweden and the Riksbank
Risks in the interest rate
forecast
+ Higher inflation and lower growth
- Falling commodity prices
- Financial turmoil
Repo rate
Per cent
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
97
98
99
00
01
02
03
04
05
06
07
08
Source: the Riksbank
Repo rate a forecast -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
04
05
06
07
08
Note. Broken lines refer to the Riksbank’s forecasts
09
10
11
Source: The Riksbank
Nominal and real repo rates
Per cent
7
7
Real repo rate
Forecast, real repo rate, M PR 2008:2
Forecast, real repo rate, M PU April 2008
Nominal repo rate
Forecast, nominal repo rate, M PU April 2008
Forecast, nominal repo rate, M PR 2008:2
6
5
6
5
4
4
3
3
2
2
1
1
0
0
-1
-1
01
02
03
04
05
06
07
08
09
10
11
Sources: National Institute of Economic Research, Prospera Research AB and the Riksbank