With the repo rate and rate path unchanged, the February policy meeting was largely a non-event. The minutes from the meeting that were published today were actually more of an event.
Notably, Deputy Governor Jansson, who previously has been classified to the hawkish camp, came out as more dovish than we had expected. More specifically, he said that he “will not vote for a repo-rate increase until CPIF inflation picks up and rises above 1.5 per cent”. According to both our and the Riksbank’s forecast CPIF-inflation will break 1.5% in January 2015.
Jansson also said that “if further progress is made in managing the risks associated with household debt he could imagine voting for an unchanged repo rate at today’s low level even with a CPIF inflation rate well over 1.5 per cent.” He made it totally clear that inflation will be his major priority in his monetary policy considerations in the year ahead. Against this background, he also said that it would be necessary to consider “further repo-rate cuts if the expected increase in inflation fails to materialise”.
Otherwise, the minutes came with few surprises. Governor Ingves argued that the trade-off between financial stability matters and short-term inflation is still very much in place. Also, governor af Jochnick remains concerned over household indebtedness.
The minutes are somewhat obsolete as we have had mainly soft data, notably the low inflation print for January, since the meeting. Although low inflation is the currently focus for the Riksbank, financial stability issues may gain importance during the course of the 2014. Strong domestic demand and the housing market heating up further are important reasons to why we still see a first rate hike before year-end 2014. But risks are clearly tilted too later rather sooner hikes.
Nordea