Swedish Riksbank Repo Rate Cut

December 17, 2013

A one-year pause in monetary easing was ended this month, but the 25-basis point cut to 0.75% was expected by market analysts.  Two of six members of the Executive Board had sought a further cut all year, and now the majority agreed, conceding that inflation had not developed as assumed.  Summarizing today’s decision, a statement released after this last scheduled meeting of 2013 leads off

Economic activity is developing largely as the Riksbank had forecast earlier. However, inflation has been unexpectedly low and, despite the recovery, inflationary pressures over the coming year are expected to be much lower than in the most recent forecast in October. To contribute to inflation rising towards 2 per cent, the Executive Board of the Riksbank has decided to cut the repo rate by 0.25 percentage points, to 0.75 per cent, and to make a downward adjustment in the repo-rate path for the entire forecast period. Slow increases in the repo rate are not expected to begin until the start of 2015. The risks linked to high household indebtedness remain, but the low inflation rate justifies cutting the repo rate.

Four previous cuts of 25 basis points each were implemented in December 2011, February 2012, September 2012 and December 2012.

Officials at the Riksbank now project total inflation next year of only 0.6%, half as much as in their prior forecast.  Inflation was revised downward to a lesser extent for the following two years as well.  After about 0.9% growth in 2013, officials project rises in GDP of 2.5%, 3.7% and 2.8%.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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