Swedish Riksbank Repo Rate Stays at -0.50%

July 4, 2017

The most telling passage from the Executive Board’s post-policy review statement shifts the near-term policy bias from ease to neutral:

The fact that inflation has recently been slightly higher than expected and that the risks of setbacks abroad are thought to have decreased makes it less likely than before that the Riksbank will cut the repo rate in the near term.

Policy will nonetheless continue to be oriented mostly toward lifting inflation back to target and promoting economic growth to absorb slack. For one thing, officials do not rule out extra stimulus in the near term should developments shift and make such a move necessary. For another thing, an initial first repo rate increase is not predicted until around the middle of next year, the same timing as imagined in late April when policy was last reviewed. The repo rate has been non-positive since October 2014 and went progressively more negative after cuts of 10 basis points in February 2015, 15 bps in March 2015, 10 bps in July 2015 and 15 bps in February 2016 to the current level of minus 0.50%. Moreover, the Riksbank is buying foreign currency-denominated bonds. SEK 15 billion of such during the second half of 2017 will bring the total size of that program to SEK 290 billion by the end of this year.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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