Policymakers at the Swedish central bank has noted that the unease in Europe is casting a shadow over the Swedish economy, the minutes from Riksbank's July meeting showed Tuesday.
"A central issue, for several members of the Executive Board when making the monetary policy decision, was how the unexpectedly strong development of the Swedish economy should be seen in relation to the increased concern about weaker development in the euro area," the minutes showed.
The Executive Board agreed that the repo rate needs to be low to stimulate the economy. However, there were differences with regard to how expansionary monetary policy should be.
At the meeting on July 3, the Executive Board of the Riksbank decided to leave the repo rate unchanged at 1.50 percent and to adjust the repo-rate path downwards somewhat.
Deputy Governors Karolina Ekholm and Lars Svensson entered reservations against the decision to keep the repo rate unchanged and against the repo-rate path in the Monetary Policy Report. They both advocated a lowering of the repo rate to 1 percent and a lower repo-rate path than in the report.
According to them, a lower repo rate would also put the economy in a better initial position if the problems in the euro area were to escalate.
The central bank, during the meeting, upped the gross domestic product forecast for this year to 0.6 percent from the April projection of 0.4 percent. However, it slightly scaled back the growth projection for next year to 1.7 percent from 1.9 percent estimated earlier.
The inflation outlook was lowered to 1.1 percent in 2012 from the April forecast of 1.2 percent. The forecast for 2013 was cut to 1.7 percent from 1.9 percent.
by RTT Staff Writer
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