Transcript of the questions and answers from the press conference

Could you please summarise the debate? Can you tell us what the Monetary Department’s recommendation was? And what was the main argument that convinced the majority of the Bank Board to vote for leaving interest rates unchanged?

We don’t publish the Monetary Department’s recommendation. We put it on our website some time later, because we want to be as transparent as possible, but there’s a delay between the vote and its publication.

The main argument was: the core inflation outlook still at 3% and headline inflation next year slightly above 2%. That’s the outlook. In addition, inflation probably increased markedly in October due to the technical effect of the energy savings tariff. Now inflation figures at levels higher than in September will be published for the next three months. The inflation figure published next week may even be around 8%. We want to prevent inflation expectations from adapting to this temporary increase in inflation. We want to demonstrate that we want to be strict and we will not allow inflation expectations to increase further and a wage spiral to emerge in the economy. We want to be sure inflation really will decrease next year.

You include among the main risks a potential unanchoring of inflation expectations, wage bargaining and the January repricing, which will moreover involve a relatively large change in administered prices of energy, as we learned this week. Should we interpret this as meaning that it will now make sense to do nothing in December and to hold off with any rate movements until January, or rather early February, when the Bank Board’s first 2024 meeting will take place? Or possibly even March, as the January inflation data may not be known yet at the Bank Board’s first meeting in February.

A related question: I have noticed speculation among analysts that the Bank Board could reschedule its first 2024 meeting to a later date in February, after the January inflation figure becomes known. Can you comment on that?

As regards the December meeting, both options – unchanged rates and a rate cut – are open. We want to be forward-looking. It still holds true that we target inflation and we want to be forward-looking. So, if the assessment of the new data that comes in – and there will be quite a lot of new data by December – by a majority of the Bank Board members is that some inflationary risks have disappeared, a rate cut is possible. But it holds true for the time being that we want to be hawkish and we want to be tight for as long as possible, but also forward-looking.

As for the schedule, the Bank Board hasn’t adopted it yet. It hasn’t been submitted for approval yet, so I can’t comment on that in any more detail.

In the past you also worked with an alternative scenario assuming elevated inflation expectations besides the baseline scenario. From what you said today, it seems you’re still working with it, so I just want to make sure about that. Do the majority of the Bank Board prefer the alternative scenario that assumed an overall postponement of the downward interest rate path? Or do you primarily prefer the baseline scenario, which would, however, imply that if elevated inflation expectations do not materialise, monetary policy should catch up with the forecast, with rates possibly being cut in larger steps at the start of next year? Can you hint at which of these options you see as more likely?

Neither of them. The majority preferred neither the alternative scenario nor the baseline scenario. Our assessment was that for the time being we perceive more inflationary risks compared with the baseline scenario – above all wage bargaining, the core inflation outlook, the government deficit, and possibly repricing – in short, growth in the quantity of money not slowing enough to deliver a decrease in inflation to 2%. For us, the alternative scenario was a basis for assessing the costs of keeping rates higher for longer than, say, the level expected by the market. So far, the result is that the costs will not be so high as to negate this decision. The primary goal is to reduce inflation, and we want to deliver that to our country.