No Change in Swedish Monetary Policy

December 16, 2009

As analysts predicted, the Riksbank repo rate was left at 0.25%, and the projected future path of that rate was also not changed.  That forecast anticipates no increase in central bank rates until the final quarter of 2010 and a subsequent climb to 2.4% by 4Q11 and 4.1% in 4Q12.  Quantitative easing in via fixed rate loans to banks should not be needed next year.  Although an economic recovery has begun, CPI inflation is presently slightly negative and forecast to to remain low at 0.8% next year, a downward revision of 0.1 percentage point, before climbing to 3.0% in 2011.  Core CPIF inflation hovers below 2.0% through the forecast horizon to 2012.  Real GDP is projected to expand 2.7% in 2010, 3.4% in 2011, and 3.5% in 2012.  Similar to the previous policy meeting in October, Svensson dissented in favor of cutting the repo rate to zero and keeping such there through 3Q10, while Nyberg and Wickman-Parak preferred to show an earlier initial rate increase in 2010.  Six people sit on the Executive Policy Board.

The repo rate in Sweden had been at 4.75% coming into October 2008 but was cut in two increments that month by 50 basis points each time.  Reductions followed of 175 bps in December 2008, 100 bps in February 2009, 50 bps in April and 25 bps on July 1st to the current level of 0.25%.  The krona is 7.2% weaker now against the euro than just before the Riksbank first cut rates 14 months ago.  Click here to see the central bank’s latest statement and forecasts.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.



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