Monetary policy decision February 2020 Low interest rate for a - PowerPoint PPT Presentation

Monetary policy decision February 2020

Low interest rate for a long time to ensure close-to-target inflation

Global demand has slowed down in recent years Calmer GDP growth But strong labour market 14 14 Unemployment, United States 12 12 Unemployment, Euro area 10 10 8 8 6 6 4 4 2 2 0 0 02 05 08 11 14 17 20 Annual percentage change, seasonally adjusted data and share of Sources: Eurostat and the OECD labour force.

Lower interest rates in wake of increased economic unease Sources: National central banks, US Treasury and the Riksbank Yields on 10-year government bonds

Global economy on slightly firmer ground • Confidence in the manufacturing industry has stabilised • Some of the uncertainty weighing on developments has declined • Trade agreement between the USA and China • The UK has left the EU • But difficult to estimate the consequences of the new coronavirus

Signs of stabilisation in the Swedish economy too Index, average = 100, standard deviation = 10, seasonally adjusted Sources: National Institute of Economic Research and Swedbank/Silf figures. The purchasing managers' index is a diffusion index in which values above 50 indicate growth.

Balanced economic situation in Sweden • Moderate growth since middle of 2018 • Signs that growth will rise from end of 2020 • Stabilisation abroad • Housing construction increasing • Household consumption rising Annual percentage change Sources: Statistics Sweden and the Riksbank

Employment increasing but at slower pace Percentage of population, 15-74 years, seasonally adjusted data. Sources: Statistics Sweden and the Riksbank

Inflation close to target in recent years Annual percentage change Source: Statistics Sweden

Inflation subdued this year as last year by low energy prices Annual percentage change Sources: Statistics Sweden and the Riksbank

Expansionary monetary policy for inflation to be close to target 3 3 2 2 1 1 0 0 -1 -1 11 13 15 17 19 21 23 Per cent Source: The Riksbank

Low interest rates over a long time • Interest rates have fallen in recent decades 6 6 • Ageing population contributes to increased saving 4 4 • Lower productivity growth and investment 2 2 • Led to historically low policy rates 0 0 • Expectation that interest rates will be low for a long time -2 -2 United Kingdom United States Sweden • The Riksbank has adjusted monetary policy to -4 -4 96 00 04 08 12 16 20 support the economy and inflation Real government bond yields, Sources: National central banks 10-year maturity and the Riksbank

Low interest rate for a long time to ensure close-to-target inflation