Sweden Leaves Monetary Policy Unchanged


The central bank of Sweden left its benchmark repo rate steady at -0.5 percent on July 4th, 2017 as widely expected, saying economic activity is strong and inflation is approaching the 2 percent target. The bond-buying programme was also left unchanged. Policymakers added that the first rate increase is not expected to be made until the middle of 2018.

Excerpts from the Statement by the Executive Board of the Riksbank:

International economic activity is increasing in line with the Riksbank's forecasts. The risk of setbacks has declined, although there is still economic and political uncertainty in many parts of the world. Global inflationary pressures are still subdued and monetary policy abroad is expansionary.

The overall picture of the economic outlook and inflation prospects remains largely unchanged since April. Continued expansionary monetary policy is needed to stabilise inflation around 2 per cent. The Executive Board has therefore decided to hold the repo rate unchanged at −0.50 per cent. The first rate increase is expected to be made in the middle of 2018, which is the same assessment as in April. The purchases of government bonds will continue in the second half of 2017, as decided in April, and at the end of the year total purchases of government bonds will amount to SEK 290 billion, excluding reinvestments. Maturities and coupon payments will be reinvested until further notice.

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. This does not rule out repo rate cuts in the period ahead. Just as before, the Executive Board is prepared to implement further monetary policy easing if necessary to stabilise inflation and safeguard the inflation target. All of the tools that the Riksbank has described earlier can, as always, be used if necessary.

Monetary policy needs to be expansionary to safeguard the role of the inflation target as nominal anchor for price-setting and wage formation. But the low interest rates at the same time contribute to increasing the risks linked to high and rising household indebtedness. To achieve long-term sustainable development in the Swedish economy, these risks need to be managed via targeted measures within housing policy, taxation policy and macroprudential policy.

Sweden Leaves Monetary Policy Unchanged


Riksbank | Joana Taborda | joana.taborda@tradingeconomics.com
7/4/2017 7:51:03 AM