Monetary policymeetingSeptember2007
Swedish economy developing strongly
Cost pressures increasing
Financial unrest creates uncertainty
View of future repo rate remains largelyunchanged since June
Repo rate is raised by 0.25 percentagepoints to 3.75 per cent
Interest rate needs to be raised over thecoming years to attain the inflation targetof 2 per cent
Inflation on target one year aheadAnnual percentage change
Note. The broken line refers to theRiksbank’s forecast in the MPR 2007:2.
Sources: Statistics Sweden and the Riksbank
CPI
New data since June
Slightly stronger labour market
Low growth in productivity
Rising food prices
Rising inflation expectations
UnemploymentPercentage of labour force, seasonally-adjusted data
Sources: Statistics Sweden and the Riksbank
Note. The broken line refers to theRiksbank’s forecast in the MPR 2007:2.
Open unemployment
Total unemployment
Productivity growthAnnual percentage change
Sources: Statistics Sweden and theRiksbank
Note. The broken line refers to theRiksbank’s forecast in the MPR 2007:2.
Food prices in differentchannelsAnnual percentage change
Sources: The Economist, Statistics Sweden and theRiksbank
Food prices in CPI (right scale)
The Economist commodity index -foods (left scale)
CPI and inflationexpectationsAnnual percentage change
Sources: NIER, Statistics Sweden and theRiksbank
CPI
Households,NIER
Companies,NIER
Note. The broken line refers to theRiksbank’s forecast in the MPR 2007:2.
Unrest in the financialmarkets
Problems in the US sub-prime market
Increased uncertainty and reducedwillingness to take risks
Disruptions in the interbank market
Less effect in Sweden
Consequences
Higher credit spreads/increased loan costs
Falling stock market prices
Weaker growth
Reduced willingness to invest
Increased precautionary savings
US certificates and treasury bills30 day duration, per cent
Sources: Bloomberg and the Federal ReserveBoard
Risks
Higher cost pressures
Financial unrest
Summary
Swedish economy is developing strongly
Cost pressures are rising
Interest rate needs to be raised overcoming years to attain inflation target of 2per cent.
The view of the future repo rate remainsunchanged since June
Interest rate path is a forecast, not apromise
Better communication
Six monetary policy meetings a year
Interest rate path published after eachmeeting
Three monetary policy reports
Three updated forecasts for a smallnumber of variables
Applies with effect from December