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.


Wednesday February 28 2018
Swedish Economy Grows 0.9% in Q4
Statistics Sweden | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Swedish economy grew by 0.9 percent on quarter in the last three months of 2017, following a 0.8 percent expansion in the previous period and missing market expectations of 1 percent.

Household consumption rose by 0.6 percent in the fourth quarter, following a 0.5 percent increase in the previous period. In addition, changes in inventories added 0.3 percentage points to GDP growth, while government spending growth slowed to 0.2 percent from 0.5 percent in the third quarter and gross fixed capital formation shrank 1.3 percent (vs 3.8 percent in Q3).

Net external demand contributed positively, as exports jumped 2.4 percent (vs 0.2 percent in Q3) while imports rose at a softer 1.2 percent (vs 1.4 percent in Q3).

On the production side, production of goods increased by 1.3 percent (vs 0.9 percent in Q3) and service-producing industries grew by 0.6 percent (vs 0.9 percent in Q3). 

Employment, measured as the total number of hours worked, increased by 1.0 percent, seasonally adjusted and the total number of persons employed rose by 0.4 percent.

Year-on-year, the GDP rose by 3.3 percent after an increase of 2.9 percent in the third quarter, but slightly below market consensus of 3.4 percent.


Wednesday February 14 2018
Sweden Leaves Rates Steady, Cuts Inflation Forecasts
Riksbank | Joana Taborda | joana.taborda@tradingeconomics.com

The central bank of Sweden held its benchmark interest rate at -0.5 percent on February 14th 2018, in line with market expectations, saying the economic activity in Sweden is strong and inflation is close to the 2 percent target. However, inflation forecasts for 2018 were revised down to 1.7 percent from 2 percent. Policymakers also reinforced that slow repo rate rises are set to be initiated during the second half of 2018.

The central bank also lowered inflation forecasts for 2019 to 2.6 percent from 2.8 percent but left 2020's unchanged at 3.1 percent. GDP growth is seen at 2.8 percent in 2018, slightly below earlier estimates of 2.9 percent. For 2019, growth is seen higher at 1.8 percent (1.7 percent earlier estimated) and for 2020 it was left unchanged at 2.1 percent. 

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

For inflation to remain close to target going forward, it is important that economic activity continues to be strong and has an impact on price development, and that the Swedish krona does not strengthen too quickly. Monetary policy therefore still needs to be expansionary.

In light of this, the Executive Board has decided to hold the repo rate unchanged at −0.50 per cent. The forecast for the repo rate is unchanged since December and indicates that slow increases are set to be initiated during the second half of this year. The Riksbank's net purchases of government bonds amount to just over SEK 310 billion, expressed as a nominal amount. Until further notice, redemptions and coupon payments will be reinvested in the bond portfolio.

According to the Riksbank's forecast, the appropriate time is approaching to slowly begin raising the repo rate. But it is important not to raise the rate too early. Economic activity is strong and inflation has been close to 2 per cent for some time, but the lower inflationary pressures create uncertainty over how inflation will develop going forward. It is also important that the krona does not appreciate too quickly. It has taken a long time to bring inflation and inflation expectations back to 2 per cent, and the uncertainty surrounding the development of inflation means that monetary policy needs to proceed cautiously. If conditions were to change, the Executive Board is, as before, prepared to implement further monetary policy easing.


Wednesday December 20 2017
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 December 20th, 2017, as widely expected, saying monetary policy needs to remain expansionary for inflation to continue to be close to the 2 percent target. Also, the central bank added that it expects to begin slowly raising the repo rate in the middle of 2018.

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

The economic prospects and outlook for inflation in Sweden are largely unchanged from October. Economic activity is strong and the employment rate is high. Although the decline in housing prices is expected to dampen housing investment in the coming years, the effects on GDP growth will be partly counteracted by the stronger demand from abroad.

Although inflation has now been close to 2 per cent for some time, prior to this it was below the target for a long time. It has required a great deal of support from monetary policy to bring up inflation and inflation expectations. Economic activity needs to remain strong for inflation to continue to be close to the target. It is also important that the krona does not appreciate too quickly.

The Executive Board of the Riksbank has therefore decided to hold the repo rate unchanged at −0.50 per cent and is expecting, as before, to begin slowly raising the repo rate in the middle of 2018. The Riksbank's net purchases of government bonds will amount to a nominal value of SEK 290 billion at the end of 2017. Redemptions and coupon payments in the government bond portfolio will be reinvested until further notice. Large redemptions, amounting to around SEK 50 billion, will occur during the first half of 2019. In addition, there are coupon payments totalling around SEK 15 billion from January 2018 to June 2019. To retain the Riksbank's presence on the market and attain a relatively even rate of purchase going forward, the reinvestments of these redemptions and coupon payments will begin as early as January 2018 and continue until the middle of 2019. This means that the Riksbank's holdings of government bonds will increase temporarily in 2018 and the beginning of 2019.

Just as before, the Riksbank 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 be used if necessary.

Monetary policy safeguards the inflation target's role as nominal anchor for price and wage formation and thereby contributes to the positive development of the economy. 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 measures within housing policy, taxation policy and, if necessary, macroprudential policy.