First Swedish Monetary Policy Rate Hike since 2011

December 20, 2018

The Swedish Riksbank Executive Board raised its repo rate from -0.50% to -0.25%, marking the first rate hike since July 2011 and the first change since a 15-basis point cut in February 2016. The rate has been zero percent or lower since October 2014. A statement from the Board doesn’t anticipate another rate hike until the second half of next year and thereafter looks for a pace of two likely increases per year. Today’s first upward step was made in the context of higher inflation and expected inflation as well as strong Swedish growth, but note is made that inflation nonetheless remains lower than officials were expecting. Projected inflation next year was lowered even though economic growth was also revised downward.

Underscoring the cautious path Swedish monetary officials plan to take on reversing its ultra-ease stance, a decision was taken to continue reinvesting maturing bonds acquired through quantitative stimulus earlier this decade. The key interest rate now becomes less negative than the ECB’s but more so than the Bank of Japan’s rate.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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