Looking at other Executive Board member’s views around the rate outlook, Bunge and Breman appear most open to the idea of another cut to support economic activity, with Bunge noting that this may come in the Autumn. Seim and Jansson spoke on the long-end of the June MPR rate path, with the latter seeing “a need to have a policy rate for some time that is lower than what we assess it will be in the long term”.
- Bunge: “An economic recovery is a necessary condition for inflation to remain around the target going forward, and I therefore support our taking action now by cutting the policy rate”.
- “I consider that there is still reason to act gradually and have a certain stability in monetary policy when the shifts in developments abroad are as large as they are now”….” If any of the scenarios described in the draft report were to occur and lead to increased upside risks for inflation, we are prepared to act against this, too. But as the situation is now, I consider it may be necessary for further easing of monetary policy during the autumn, which is what is reflected in the policy rate path”.
- Breman: “An overall assessment is that households and companies are in a wait-and-see mode, and this is weighing on the Swedish economy in a situation where we have had weak growth for several years. In such a situation, monetary policy should support the development of the real economy unless the inflation target is threatened”.
- “It is more likely that the rate will be cut one more time than be raised. This is illustrated in the rate path which shows some probability of another cut this year. Moreover, if economic activity continues to be weaker than expected, further interest rate cuts may be necessary to support economic activity.
- Jansson: “I share the conclusions in the draft report that there are now many indications that both economic activity and inflation in Sweden, in the shorter term, look to be weaker than expected and that it is therefore appropriate to now slightly revise our monetary policy plan in a more expansionary direction. I consider the risk of making a major mistake in doing so to be very small”.
- “The uncertainty surrounding the long-term level of the policy rate is, of course, very great and it is entirely possible, even probable, that we will need to revise this level several times in our forecasts going forward”…“ However, the important message right now, as I see it, is that we see a need to have a policy rate for some time that is lower than what we assess it will be in the long term”.
- Seim: “ In the long term, however, it is reasonable to assume that we are moving towards the middle of the interval in which we assess that the neutral interest rate lies. By the long term, we mean a point in time beyond our three-year forecast horizon”.
- “The slope of the interest rate path should not be taken to mean that we can decide whether the neutral interest rate is 2.25 or at some other level within the interval but it is a reasonable estimate that serves as an anchor in our forecast. However, one should be aware that, just as we adjust the interest rate path to ensure we reach our target when new shocks affect the economy, we may also change our assessment of the long-term neutral interest rate”