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MINUTES: Breman: Would have preferred a flatter rate path

RIKSBANK
  • "Three main reasons for taking action now with an increased policy rate and not waiting."
  • "First, the inflation upturn is broad and risks becoming persistent if we do not act."
  • "Second, inflation expectations are rising. Although Prospera’s survey shows that inflation expectations five years ahead are still well anchored close to 2 per cent, other data indicate that the inflation expectations of households and companies have risen."
  • "Third, it takes time for monetary policy to have an effect. If we delay rate hikes, both inflation and inflation expectations risk becoming entrenched on a high level. This may lead to more rate hikes being required to stabilise inflation resulting in major negative effects on the real economy and the labour market. It is better to slow down now than risk having to slam on the brakes later."
  • "Despite my reluctance to entering a reservation against a rate path, I thought carefully about doing so prior to today's meeting. In my opinion, the rate path indicates too many increases over the forecast horizon given the information we currently have. I still think that the risk picture for near-term inflation is on the upside. However, importantly, the prospects for growth are now on the downside."
  • "First, high inflation in the near term needs to be weighed against increasingly uncertain growth prospects in the medium term. In addition to the war, we have an increased spread of infection in China that may reduce global growth."
  • "Second, we do not know how much and how rapidly sensitive companies and households adjust their behaviour to interest-rate hikes."
  • "Third, rate hikes are now being combined with a tapering of our asset holdings. Reducing the balance sheet is probably less contractionary than a rate hike, but it pulls in the same direction. And when it happens simultaneously, they reinforce each other. This effect should not be underestimated."
  • "I would have preferred a rate path with a total of two to three increases this year and then gradual rises going forward to a lower level than the one indicated by the rate path."
  • "If inflation goes even higher and becomes even more persistent than in our forecast, I will support doing what is necessary to attain the inflation target, including more rate hikes than are in the current path and/or a faster tapering of asset holdings."
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