Swedish Riksbank Signals Unchanged Interest Rate for Next 12 Months

April 18, 2012

The Executive Board of the Swedish Riksbank left its repo rate at 1.5% and did not change its guidance of future policy, either.  According to a statement from officials, the repo rate is likely to be unchanged at 1.5% through 1Q13 and then rise about 75 bps during the year to 1Q14 and by a similar amount in the year to 1Q15. Real GDP contracted in late 2011, and though such is growing slightly again, projected growth for 2012 as a whole is only 0.7%.  Total and core inflation are expected to average less than the 2.0% target both this year and in 2013, reflecting low cost pressure and previous krona strength. 

The Riksbank had been in tightening mode after mid-2010, raising the repo rate seven times by 25 basis point each.  The last of those moves was implemented in July 2011 and left the repo rate level at 2.0%, but cuts of 25 bps each were done in December 2011 and February 2012 when growth was contracting.  As they did in February, two of the six Executive Board members, Deputies Ekholm and Svennson, dissented in favor of a 1.0% repo rate level and preferred a lower overall projected repo rate path than the majority.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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