Wednesday February 13 2019
Sweden Leaves Rates Unchanged
Sveriges Riksbank | Joana Taborda | joana.taborda@tradingeconomics.com

The central bank of Sweden left its key repo rate steady at -0.25 percent on February 13th 2019, in line with market expectations and following a surprise 25bps hike in the previous meeting. Policymakers said economic developments in Sweden and abroad have entered a phase of lower growth and the conditions for inflation to remain close to 2 percent in the coming years have not changed to any great extent. Also, the central bank reiterated the next hike in the repo rate is seen during the second half of 2019, provided that the economic outlook and inflation prospects are as expected.

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

Growth abroad has slowed down, but economic activity will continue to be good over the next few years, with low unemployment and rising wage growth in many countries. There is still substantial uncertainty about the strength of the international economy.

Although indicators point to sentiment in the household and corporate sectors having dampened in Sweden, the picture of strong economic activity remains. Developments on the labour market have been slightly stronger than expected and unemployment is at its lowest level in a decade. Both inflation and inflation expectations have become established at around 2 percent. 

The strong economic activity and rising cost pressures both in Sweden and abroad mean that the conditions are good for inflation to remain close to the target in the coming years. This outlook has not changed to any great extent since December. 

Reinvestments of principal payments and coupons in the government bond portfolio will continue until further notice.

Several factors indicate that monetary policy needs to proceed with caution. As in December, the forecast for the repo rate indicates that the next increase will be during the second half of 2019, on condition that the economic outlook and inflation prospects are as expected. The Executive Board assesses that the repo rate needs to be raised at a slow pace even after that, roughly twice a year by 0.25 percentage points on each occasion, for inflation to remain close to 2 per cent. However, there is uncertainty over developments abroad and the strength of domestic demand. It is the economic outlook and inflation prospects that will determine future monetary policy.




Thursday December 20 2018
Sweden Hikes Repo Rate for 1st Time since 2011
Sveriges Riksbank | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Sveriges Riksbank raised its repo rate by 25 bps to -0.25 percent on December 20th in a surprise move, saying that the need for a highly expansionary monetary policy has decreased slightly as inflation and inflation expectations have become established at around 2 percent amid strong economic activity. The central bank lifted its policy rate for the first time since July 2011 from the historic low where it has sat since February 2016. Policymakers also said next rate rise will probably occur during the second half of 2019.

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

The global economy, which has grown rapidly in recent years, is now entering a phase of more subdued GDP growth, which is in line with the Riksbank's earlier forecasts. Cost pressures are gradually rising abroad, and monetary policy is moving in a less expansionary direction. However, there is still considerable uncertainty over global economic developments, not least with regard to the effects of Brexit and the trade conflict between the United States and several other countries.

Economic activity in Sweden is still strong, although GDP growth and inflation have been weaker than expected. The employment rate is historically high, companies are reporting major shortages of labour and cost pressures are rising. The strong economic activity has contributed to inflation rising gradually since 2014 and being close to the 2 per cent target in recent years.

Even though inflation has been lower than expected, the conditions remain good for inflation to stay close to the inflation target going forward. As inflation and inflation expectations have become established at around 2 per cent, the need for a highly expansionary monetary policy has decreased slightly. The Executive Board has therefore decided to raise the repo rate from −0.50 per cent to −0.25 per cent. The inflation forecast assumes that monetary policy stimulation will be decreased slowly.

It is important that economic activity continues to be strong and has an impact on price increases. With a repo rate of −0.25 per cent, monetary policy is still expansionary and will thereby also continue to support economic activity. The pacing of rate rises in the period ahead will be adjusted according to the development of the economic outlook and inflation prospects. The fact that inflation has been lower than expected recently illustrates that there is uncertainty over the strength of inflationary pressures. The forecast for the repo rate therefore indicates that the next rate rise will probably occur during the second half of 2019. After this, the forecast indicates approximately two rate rises per year by 0.25 percentage points each time. Reinvestments of principal payments and coupons in the government bond portfolio will continue until further notice.

The low interest rates are exacerbating the risks linked to high and rising household indebtedness, while the fundamental causes of the high indebtedness still remain. It is essential, to ensure that the development of the Swedish economy is sustainable in the long term, that measures are taken in housing policy and taxation policy and that macroprudential policy is designed appropriately.


Thursday November 29 2018
Swedish Economy Contracts For 1st Time Since 2013
Statistics Sweden | Stefanie Moya | stefanie.moya@tradingeconomics.com

The Swedish economy shrank 0.2 percent on quarter in the three months to September 2018, following a downwardly revised 0.5 percent expansion in the previous period and below market expectations of a 0.3 percent growth. It was the first contraction since the second quarter of 2013, as household consumption declined.

Household consumption fell 1.0 percent in the third quarter of 2018, after rising 0.5 percent in the second quarter of the year and government spending showed no growth (vs 0.5 percent in Q2).  Changes in inventories reduced 0.4 percentage points to the growth. Meantime, net trade contributed positively to the GDP, as exports rose 0.3 percent and imports dropped 0.6 percent. In addition, fixed investment increased 0.8 percent, rebounding from a 0.9 percent decline in the prior period.

On the production side, market production of goods and services dropped by 0.2 percent. Production of goods fell by 1.1 percent (vs -0.4 percent in Q2) and service-producing industries advanced by 0.3 percent (vs 1.0 percent). Employment measured as the total number of hours worked went up by 0.2 percent, and the total number of persons employed rose by 0.3 percent.

Year-on-year, the economy advanced 1.6 percent, slowing from an upwardly revised 2.7 percent expansion in the prior period and missing market consensus of a 2.3 percent growth.




Wednesday October 24 2018
Sweden Leaves Monetary Policy Unchanged
Riksbank | Gabriela Costa | gabriela.costa@tradingeconomics.com

The central bank of Sweden left its benchmark interest rate at -0.5 percent on October 24th 2018, in line with market expectations, saying the economic activity in Sweden is strong and inflation remains close to the target of 2 percent. However, monetary policy needs to continue to be expansionary for inflation to remain within the target. The central bank added that the repo rate will be raised by 25bps either in December or February.

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

Global economic developments continue to be positive and in line with the Riksbank's forecasts, even though, for example, developments in Italy and the escalated trade conflict between the United States and China mean that uncertainty over the prospects for the global economy has increased. In the wake of the stronger economic activity, inflationary pressures are expected to continue rising and monetary policy abroad to move in a less expansionary direction.

In Sweden, too, economic developments have been largely as expected and economic activity has been good for a long period of time. The labour market situation is expected to remain strong, even if GDP growth slows down going forward. Inflation increased to 2.5 percent in September, partly as a result of rapidly rising energy prices. Different measures of underlying inflation are lower and inflationary pressures are still assessed to be moderate. However, there are signs that inflationary pressures are rising and the conditions are good for inflation to remain close to the target of 2 percent in the coming years.

The overall picture of the economic outlook and inflation prospects remains largely unchanged since the September Monetary Policy Report. Consequently, in line with the previous forecast, the Executive Board has decided to hold the repo rate unchanged at -0.50 percent. If the economy develops in a way that continues to support the prospects for inflation, the Executive Board assesses that it will soon be appropriate to start raising the repo rate at a slow pace. The forecast for the repo rate is unchanged since the monetary policy meeting in September and indicates that the repo rate will be raised by 0.25 percentage points either in December or February. Reinvestments of principal payments and coupon payments in the government bond portfolio will continue until further notice.

The low interest rates are exacerbating the risks linked to high and rising household indebtedness, while the fundamental causes of the high indebtedness still remain. It is essential, to ensure that the development of the Swedish economy is sustainable in the long term, that measures are taken in housing policy and taxation policy and that macroprudential policy is designed appropriately.


Thursday September 13 2018
Swedish GDP Growth Revised Down to 0.8% in Q2
Statistics Sweden | Stefanie Moya | stefanie.moya@tradingeconomics.com

The Swedish economy expanded 0.8 percent on quarter in the three months to June 2018, lower than a 1 percent growth in the preliminary estimate, following a downwardly revised 0.5 percent expansion in the previous period and below market expectations of 1 percent, final figures showed. It was the strongest growth since the second quarter of 2018, driven by household consumption and government spending.

Household consumption advanced 0.9 percent in the second quarter of 2018, after increasing 0.5 percnet in the first quarter of the year and government spending grew 0.3 percent (vs 0.2 percent in Q1). Changes in inventories added 0.6 percentage points to the growth. Meanwhile, net trade contributed negatively to the GDP growth, as imports rose 0.8 percent (vs 0.9 percent in Q1) and exports rose at a softer 0.4 percent (vs a flat reading in Q1). Additionally, fixed investment shrank 0.5 percent, after a 2.5 percent gain in the prior period.

On the production side, market production of goods and services increased by 0.9 percent. Production of goods went up by 0.2 percent (vs 1.1 percent in Q1) and service-producing industries advanced by 1.3 percent (vs 0.8 percent). Employment measured as the total number of hours worked rose by 0.8 percent seasonally adjusted and the total number of persons employed grew by 0.2 percent.

Year-on-year, the economy advanced 2.5 percent, down from a 3.3 percent growth in the preliminary estimate, following a downwardly revised 2.8 percent expansion in the previous period and missing market consensus of 3.3 percent.


Thursday September 06 2018
Sweden Holds Interest Rate Steady at -0.5%
Riksbank | Agna Gabriel | agna.gabriel@tradingeconomics.com

The central bank of Sweden left its benchmark interest rate at -0.5 percent on September 6th 2018, as expected, saying the economic activity in Sweden is strong and inflation is close to the 2 percent target. However, monetary policy needs to continue to be expansionary for inflation to remain close to target. Policymakers added that the repo rate will be raised by 25bps either in December or February.

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

Global economic activity remains favourable, although there is considerable uncertainty over future developments. International inflationary pressure are moderate, but expected to rise going forward. Monetary policy abroad is expansionary.

The Swedish economy has been strong over a long period of time. Inflation is close to the target of 2 per cent, but this is largely due to the rapidly rising energy prices. Different measures of underlying inflation indicate that inflationary pressures are still moderate. However, the strong economic activity creates good conditions for inflationary pressures to rise. CPIF inflation is therefore expected to stay close to the target even when the rate of increase in energy prices slows down.

It is important that economic activity continues to be strong and has an impact on price increases. Monetary policy therefore needs to remain expansionary and the Executive Board has decided to hold the repo rate unchanged at −0.50 per cent, in line with the forecast in July. If the economy develops as expected, there will soon be scope to slowly reduce the support from monetary policy. The forecast for the repo rate indicates that it will also be held unchanged at the monetary policy meeting in October, and then raised by 0.25 percentage points, either in December or February. The Riksbank’s holdings of government bonds amount to a good SEK 330 billion, expressed as a nominal amount. Until further notice, redemptions and coupon payments will be reinvested in the bond portfolio. All in all, monetary policy will continue to be expansionary for a long period of time.

The Riksbank continues to exercise considerable vigilance as regards the development of inflationary pressures in the economy. The krona exchange rate also has a bearing on inflation, and it is important that the krona develops in a manner compatible with inflation remaining close to the target. In addition, there is still considerable uncertainty regarding international developments. The risks of excessively low inflation merit particular attention, as at the prevailing interest rate levels, excessively low inflation is more difficult to manage than excessively high inflation. If the conditions for inflation were to change, the Executive Board is prepared to adjust monetary policy.

The low interest rates are exacerbating the risks linked to high and rising household indebtedness, while the fundamental causes of the high indebtedness still remain. Achieving long-term sustainable development in the Swedish economy therefore requires measures within housing policy, taxation policy and, where necessary, macroprudential policy.


Monday July 30 2018
Swedish Q2 GDP Growth Beats Forecasts
Statistics Sweden | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Swedish economy advanced 1 percent on quarter in the three months to June 2018, easily beating market expectations of 0.5 percent and following an upwardly revised 0.8 growth in the previous period, a preliminary estimate showed. It was the strongest pace of expansion since the second quarter of 2017, mainly boosted by household consumption, government spending and net trade.

Household consumption rose 0.9 percent in the second quarter of the year (vs 0.8 percent in Q1), and government spending increased 0.2 percent (vs unchanged in Q1). In addition, net trade contributed positively to GDP growth as exports went up 0.5 percent (vs -0.2 percent in Q1) while imports fell 0.1 percent (vs 0.6 percent in Q1); and changes in inventories added 0.3 percentage points to the growth. By contrast, fixed investment contracted 0.2 percent in the three months to June, after a 2.5 percent jump in the previous period.

On the production side, market production of goods and services increased by 1.2 percent, the same pace as in the first quarter. Production of goods increased by 0.7 percent (vs 0.8 percent in Q1) and service-producing industries grew by 1.5 percent (vs 1.4 percent in Q1). Employment measured as the total number of hours worked rose by 1 percent, and the number of persons employed increased by 0.3 percent.

Year-on-year, the GDP advanced 3.3 percent in the second quarter, the same pace as in the previous period and also beating market consensus of 2.6 percent. It remained the strongest pace of expansion since the second quarter of 2016.


Tuesday July 03 2018
Sweden Holds Key Interest Rate at -0.5%
Riksbank | Joana Ferreira | joana.ferreira@tradingeconomics.com

The central bank of Sweden held its benchmark interest rate at -0.5 percent on July 3rd, as widely expected, saying monetary policy needs to continue to be expansionary for inflation to remain close to target despite strong economic activity. Still, the central bank reiterated that slow repo rate rises will be initiated towards the end of the year.

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

Economic developments abroad remain favourable. However, uncertainty over future developments has risen as a result of factors such as increased trade restrictions and economic policy developments in Italy. Inflation abroad is moderate but will rise this year due to higher oil prices. Normalisation of monetary policy abroad is taking place slowly.

In Sweden, economic activity is high, the labour market strong and inflation on target. As in other countries, higher energy prices have contributed to rising inflation. The krona exchange rate has developed more weakly than expected and together with more rapid energy price increases, this will contribute to higher inflation in the year ahead compared with in the previous assessment. In the longer term, however, the forecast for CPIF inflation is unchanged.

Measures of underlying inflation, which provide an indication of where inflation is heading, still suggest that inflationary pressures are moderate. For inflation to remain close to 2 per cent in the period ahead, it is important that economic activity continues to be strong and has an impact on price increases. The exchange rate is expected to strengthen gradually in the coming years but there is uncertainty surrounding the forecast. It is important that the krona exchange rate develops in a manner compatible with inflation remaining close to target.

Overall, the Executive Board deems it appropriate to keep monetary policy unchanged. The Executive Board has therefore decided to leave the repo rate at −0.50 per cent. The forecast for the repo rate is also unchanged and indicates as before that slow repo rate rises will be initiated towards the end of the year. The Riksbank's holdings of government bonds amount to about SEK 330 billion, expressed as a nominal amount. Until further notice, redemptions and coupon payments will be reinvested in the bond portfolio.

If the conditions for the development of inflation were to change, the Executive Board is prepared to adjust monetary policy. The risks of excessively low inflation merit particular attention, as at the prevailing interest rate levels, excessively low inflation is more difficult to manage than excessively high inflation.

The Executive Board has also decided to extend the mandate that facilitates rapid intervention on the foreign exchange market. The krona has weakened in the past year. But in the years ahead, it is expected to strengthen and the exchange rate remains a source of uncertainty as regards the development of inflation. An excessively rapid appreciation of the krona would make it more difficult to stabilise inflation.

The low interest rates are exacerbating the risks linked to high and rising household indebtedness, while the fundamental causes of the high indebtedness still remain. Achieving long-term sustainable development in the Swedish economy therefore requires measures within housing policy, taxation policy and, where necessary, macroprudential policy.


Wednesday May 30 2018
Swedish GDP Grows 0.7% QoQ in Q1
Statistics Sweden | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The Swedish economy advanced by 0.7 percent on quarter in the first three months of 2018, the same pace as in the previous three-month period and above market expectations of a 0.5 percent rise. Household consumption rose faster and fixed investment rebounded.

Household consumption went up by 0.8 percent in the first quarter of 2018, following a 0.7 percent increase in the previous period. Also, gross fixed capital formation rebounded significantly (2.8 percent vs -0.8 percent in Q4) and changes in inventories added 0.1 percentage points to GDP growth. Meanwhile, government spending rose at a softer 0.1 percent (0.2 percent in Q4).

Net external demand contributed negatively, as exports fell 0.2 percent (2.0 percent in Q4) while imports advanced 1.0 percent (the same pace as in Q4).

On the production side, production of goods went up by 1.1 percent (1.3 percent in Q4) and service producing industries rose by 1.2 percent (0.6 percent in Q4).

Employment, measured as the total number of hours worked, was unchanged, and the total number of persons employed increased by 0.6 percent, seasonally adjusted.

Year-on-year, the GDP grew 3.3 percent after a downwardly revised 2.9 percent in the fourth quarter, but slightly below market estimates of 3.4 percent.


Thursday April 26 2018
Sweden Holds Key Interest Rate at -0.5%
Riksbank | Joana Ferreira | joana.ferreira@tradingeconomics.com

The central bank of Sweden held its benchmark interest rate at -0.5 percent on April 26th, as widely expected, saying underlying inflation has been somewhat lower than expected recently, which raises questions regarding the strength of the development in inflation. Also, the central bank added that the repo rate will begin to increase towards the end of the year, which is somewhat later than previously forecast.

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

The overall picture of the economic outlook and inflation prospects remains largely unchanged since the monetary policy meeting in February. Economic activity abroad is continuing to strengthen. However, despite growth being at a high level and unemployment having fallen, inflationary pressures remain moderate, particularly in the euro area.

Conditions in the Swedish economy are strong; the employment rate is high and unemployment has fallen to the lowest level since the financial crisis. Inflation has been close to the target over the past year. In March, CPIF inflation was 2.0 per cent.

One reason why inflation is now 2 per cent is that energy prices have increased rapidly. Underlying inflation, on the other hand, has been unexpectedly low recently, which raises questions regarding the strength of the development in inflation. The weakening of the krona exchange rate in recent months is contributing to higher inflation, but if CPIF inflation is to remain close to the target going forward, it is important that economic activity is strong and has an impact on price developments. It is also important that the krona exchange rate develops in a way compatible with inflation stabilising close to the target.

Monetary policy therefore needs to remain expansionary and the Executive Board has decided to hold the repo rate unchanged at −0.50 per cent. Given the questions regarding underlying inflation, the forecast for the repo rate has been revised down somewhat and indicates that the rate will start to be raised at a slow pace towards the end of the year. The Riksbank’s holdings of government bonds amount to just over SEK 320 billion, expressed as a nominal amount. Until further notice, redemptions and coupon payments will be reinvested in the bond portfolio.

It has taken a long time to bring up inflation and inflation expectations, and there is considerable uncertainty over the development of inflation. Monetary policy thus needs to proceed cautiously. If the conditions for inflation were to change, the Executive Board is prepared to adjust monetary policy. The risks of too low inflation merit particular attention, as at the prevailing interest rate levels this is more difficult to manage than inflation that is too high.

The low interest rates contribute to increasing the risks linked to high and rising household indebtedness. At the same time, the fundamental causes of the high household indebtedness still remain. Achieving long-term sustainable development in the Swedish economy therefore requires measures within housing policy, taxation policy and, where necessary, within macroprudential policy.