Swedish Riksbank Plans to Continue Current Accommodative Stance for Rest of 2014

February 13, 2014

The Riksbank’s Executive Board left its repo rate at 0.75% and also made no changes in its macroeconomic forecast and forward policy guidance.  Following weak sub-1.0% GDP growth in both 2012 and 2013, growth prospects are much improved, with projected rises of 2.4% this year followed by 3.6% in 2015 and 2.8% in 2016.  CPI inflation remains very low and will average 0.6% this year and 0.9% among core items.  Between December 2011 and December 2012, four cuts took the repo rate down to 1.0% from 2.0%, and a fifth reduction was administered in December 2013.  Today’s statement reaffirms that low inflation trumps accelerating growth and and high consumer debt.

The repo rate needs to remain at this level until inflation picks up and the recovery is on firmer ground. As before, the repo rate is not expected to be raised until the beginning of 2015.  Monetary policy has involved balancing how low the repo rate needs to be for inflation to approach the 2% target soon enough against the increased risks linked to households’ high indebtedness that can stem from a low interest rate.

The five remaining scheduled interest rate policy announcements this year will be on April 9, July 3, September 4, October 28, and December 16.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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