Monetary policy decision October 2007

The repo rate is raised by 0.25 percentage points to 4 per cent The interest rate will need to be raised slightly further in the coming year in order to meet the inflation target of 2 per cent The view of the future interest rate remains virtually unchanged since June

Swedish economy is strong Cost pressures are increasing Productivity is increasing more slowly Wages rising more quickly Food prices rising Higher inflation expectations Repo rate is raised

Swedish economy is strong GDP growth in Sweden. Annual percentage change. Striped bars/broken lines represent the Riksbank’s forecast. Sources: The IMF, the OECD and the Riksbank

Tighter labour market 1000s of persons and per cent of the labour force. Broken lines represent the Riksbank’s forecast. Sources: Statistics Sweden and the Riksbank

Cost pressures rising Annual percentage change. Broken lines and striped bars represent the Riksbank’s forecast. Sources: Statistics Sweden and the Riksbank

Weaker internationally Subdued growth in the United States and in the euro area Problems in the US mortgage market Financial unease – increased uncertainty and less willingness to take risks Disturbances on the interbank market

Growth subdued in the United States and the euro area Annual percentage change. Broken lines represent the Riksbank’s forecast. Sources: Eurostat, US Department of Commerce and the Riksbank

Disturbances on the interbank market Percentage points. The differential is calculated as the difference between the interbank rate and the government bond rate with three months to maturity for respective countries. Source: The Riksbank

Virtually the same interest rate path as in June Higher cost pressures Tighter labour market Financial unease Weaker growth in the United States and the euro area

Repo rate raised Per cent. Broken line represents the Riksbank’s forecast. Source: The Riksbank

Inflation in line with target Annual percentage change. Broken line represents the Riksbank’s forecasts. Soruces: Statistics Sweden and the Riksbank

Risks Higher cost pressures Financial unease and weaker growth internationally

Summary Strong Swedish economy – Cost pressures rising Greater uncertainty and weaker international growth Interest rate needs to be raised in order to meet the inflation target of 2 per cent View of the future repo rate remains virtually unchanged since June

Interest rate path a forecast, not a promise Per cent. Broken line represents the Riksbank’s forecast. Source: The Riksbank