Swedish Quantitative Monetary Stimulus Augmented

October 28, 2015

Economic activity in Sweden is strengthening and inflation is showing a clear upward trend. But there is still considerable uncertainty regarding the strength of the global economy and central banks abroad are expected to pursue an expansionary monetary policy for a longer time. Compared with the previous assessment, inflation is expected to be a little lower in 2016 and 2017. CPIF inflation is still expected to be close to 2 per cent during 2016. To safeguard the robustness of the upturn in inflation, the Executive Board of the Riksbank considers it necessary to make monetary policy more expansionary.

Sweden’s repo rate was left at negative 0.35%.  From a level of zero established after a 25-basis point cut last October, the repo rate had previously been cut by 10 bps in February, 15 bps in March and, most recently, ten basis points in early July of 2015.  A program of bond purchases was launched with an initial ceiling of 80-90 billion kronor, then raised in July by 45 billion kronor and again at this meeting to SEK 200 billion to be reached by the end of next year.  Today’s statement

  • Revises 2016 forecasts downward for growth to 3.0%, CPI inflation downward to 1.4% and core inflation downward to 1.8%.
  • Revises 2017 CPI and core CPI lower to 2.4% and 2.1%.
  • Projects the end-2016 repo level at negative 0.41%, down from a prior forecast of -0.18%, and the end-2017 level at 0.12%, down from 0.40%.  Even as late at 4Q18, officials expect a repo rate of only 0.66%.
  • Indicates that policy may be eased further in the future if deemed necessary.
  • Promises continuing foreign exchange intervention as needed.

No dissenting votes were reported in today’s decisions.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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