The objective of monetary policy

According to the Sveriges Riksbank Act, the objective of monetary policy is to “maintain price stability”. The Riksbank has interpreted this objective to mean a low, stable rate of inflation.

More precisely, the Riksbank's objective is to keep inflation around 2 per cent per year, as measured by the annual change in the consumer price index (CPI). There is a tolerance range of plus/minus 1 percentage point around this target. At the same time, the range is an expression of the Riksbank’s ambition to limit such deviations. In order to keep inflation around 2 per cent the Riksbank adjusts its key interest rate, the repo rate.

On 20 June the Riksbank's Monetary Policy Report 2007:2 was published.

At its meeting on 19 June, the Executive Board of the Riksbank decided to raise the repo rate by 0.25 percentage points to 3.50 per cent. At the same time, they made the assessment that the repo rate will need to be around 4 per cent at the end of the year. Over the coming years it is probable that the interest rate will need to be raised further. The interest rate raises are expected to help ensure inflation is in line with the target from next year and onwards, and that production and employment will develop in a stable manner.

The Riksbank’s decision is based on the economic outlook and inflation forecasts presented in the Monetary Policy Report.

Report by Frederic S Mishkin and Francesco Giavazzi

In spring 2005 the Riksdag Committee on Finance decided to evaluate the monetary policy conducted by the Riksbank during the period 1995-2005. The Committee appointed two professors, Frederic S Mishkin, formerly of Columbia University in New York and now a member of the Federal Reserve Board of Governors, and Francesco Giavazzi, of Bocconi University in Milan, to carry out the evaluation.

The report "An evaluation of Swedish monetary policy 1995-2005" was published on 28 November.