Monetary Policy Report, April 2023

Inflation is still far too high and far from the inflation target. The high inflation has a negative effect on the whole economy, but particularly affects households that have small margins. For inflation to fall and stabilise around the target within a reasonable period of time, the Executive Board has decided to raise the policy rate by 0.5 percentage points to 3.5 per cent.

Because of the rapid upturn in inflation, the Riksbank has raised the policy rate unusually rapidly since April 2022, from zero per cent to 3.0 per cent in February 2023. The rate increases have not yet had full impact on economic activity and inflation. But the effects are becoming increasingly clear and CPIF inflation has fallen in recent months, roughly in line with the Riksbank's latest forecast. However, the downturn is due to falling energy prices. CPIF inflation excluding energy has been much higher than in the Riksbank's forecasts during the first months of the year.

It is important for confidence in the inflation target that inflation falls back. Low and stable inflation is a necessary condition for good economic development and real wage increases. Monetary policy is therefore still aimed at bringing inflation to the target within a reasonable period of time. To ensure that this happens, the policy rate needs to be raised further.

The forecast for the policy rate has been revised up and indicates that the policy rate will most likely be increased by a further 0.25 percentage points in June or September. Monetary policy has a tightening effect on the economy and the Executive Board assesses that following the April meeting there will be scope to adjust the policy rate in smaller steps. However, there is still considerable uncertainty and new information and how it is assessed to affect the economic outlook and inflation prospects will be decisive for the conduct of monetary policy.