Thursday September 05 2019
Sweden Holds Key Rate at -0.25%
Sveriges Riksbank | Stefanie Moya | stefanie.moya@tradingeconomics.com

The central bank of Sweden left its key repo rate unchanged at -0.25 percent on September 5th 2019, as widely expected. Policymakers noted that the economy has entered to a calmer phase and inflation is close to the target of 2 percent. The Committee said that there are still major risks that may affect economic developments. Policymakers added the interest rate is expected to be raised towards the end of the year or at the beginning of next year but at a slower pace than in the previous forecast due to worsened sentiment and low interest rates abroad.

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

For some time, the Riksbank has held the view that economic activity in Sweden would peak in 2018 and thereafter slow down. Compared with the forecast in the Monetary Policy Report in July, GDP growth is expected to be a little lower and the slowdown on the labour market seems to be taking place slightly faster than previously assessed. However, economic activity is still strong. Since the beginning of 2017, inflation has been close to the target of 2 per cent and the latest inflation outcomes have, if anything, been slightly higher than expected.

The fact that developments have largely been in line with the Riksbank’s forecast argues in favour of keeping, at present, to the previously communicated direction of monetary policy over the next six months. In line with the forecast in July, the repo rate is therefore being held unchanged at −0.25 per cent and, as before, the forecast indicates that the interest rate will be raised towards the end of the year or at the start of next year. However, market rates have fallen substantially and global interest rates are expected to remain low for a longer period of time. Together with the worsened sentiment, this underlines the importance of proceeding cautiously with monetary policy. The economic prospects are based on the repo rate being raised at a slower rate in the period ahead than in the previous forecast. In accordance with the decision from April 2019, the Riksbank will purchase government bonds for a nominal total amount of SEK 45 billion, with effect from July 2019 to December 2020. The low level of interest rates will continue to give support to the economic outlook and inflation.

There are still major risks that may affect economic developments. The forecasts consider that sentiment has deteriorated but assume that there will not be any further significant downturns in confidence among households and companies abroad and in Sweden. If the economic outlook and inflation prospects were to change, monetary policy will be adjusted.

Swedish households are highly indebted and therefore sensitive to changes in economic conditions, such as rising interest rates or higher unemployment. In order to reduce the risks linked to household indebtedness and address the structural problems on the Swedish housing market, measures within housing and tax policy and appropriate macroprudential policy are required.




Wednesday July 03 2019
Sweden Leaves Interest Rate Unchanged at -0.25%
Sveriges Riksbank | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The central bank of Sweden held its key repo rate steady at -0.25 percent on July 3rd 2019, in line with market expectations, as economic activity remains strong and inflation is close to the target of 2 per cent. Meantime, policymakers added that the forecast for the repo rate was unchanged and reiterated the intention to raise it towards the end of the year or at the beginning of next year. However, the bank underscored that uncertainty abroad poses some risks to global outlook which requires proceeding cautiously with monetary policy.

Developments both in Sweden and abroad are largely in line with the Riksbank’s forecasts. However, increasing unease over further deterioration in trade relations and a faster decline in global economic activity have clearly affected pricing on the financial markets, where interest rates on the whole have fallen. But growth abroad is relatively good and confidence among both households and companies indicates normal growth in the coming period. With the information now available, the Riksbank assesses that there is no reason to make any major adjustments to the forecasts for international inflation and growth.

Activity in the Swedish economy has remained high since the monetary policy meeting in April. Resource utilisation is expected to be high even though developments on the labour market will enter a calmer phase in the years ahead. Inflation has been close to 2 per cent since the beginning of 2017. In line with the Riksbank’s forecast, CPIF inflation amounted to 2.1 per cent in May.  

The economic outlook and inflation prospects remain good. Overall, the new information since the monetary policy meeting in April has not changed the assessment of the conditions for inflation to remain close to 2 per cent. The Executive Board has therefore decided to leave the repo rate unchanged at –0.25 per cent. The forecast for the repo rate is also unchanged and indicates that it will be increased again towards the end of the year or at the beginning of next year. This means that inflation will receive continued support from monetary policy to remain close to 2 per cent. In accordance with the decision in April, the Riksbank will purchase government bonds for a nominal amount of SEK 45 billion, with effect from July 2019 to December 2020.

However, the risks concerning international developments may have a bearing on the economic outlook and inflation prospects for Sweden as well. The downturn in international bond yields can indicate that global interest rates going forward will be low for a longer period to come. This underlines the importance of proceeding cautiously with monetary policy. If the conditions for inflation change were to change, monetary policy will be adjusted.


Thursday April 25 2019
Sweden Holds Key Rate at -0.25%
Sveriges Riksbank | Agna Gabriel | agna.gabriel@tradingeconomics.com

The central bank of Sweden left its key repo rate steady at -0.25 percent on April 25th 2019, in line with market expectations. Policymakers said the strong economic activity in Sweden indicates that inflation will remain close to 2 percent in the coming years but inflationary pressures are slightly weaker than expected. Also, the central bank delayed the next rate hike to the end of the year or to the beginning of next year and added rate rises thereafter are expected at a slower pace. In February, policymakers projected to raise rates in the second half of 2019.

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

The good global economic activity is continuing and as expected has entered a phase with lower growth rates. However, inflation abroad has been unexpectedly weak, especially in the euro area. Several central banks have communicated a more expansionary monetary policy. There is still considerable uncertainty over international developments. 

Activity in the Swedish economy is high and growth was unexpectedly rapid in the fourth quarter. The high level of demand in recent years has led to strong developments on the labour market with a historically high employment rate. Economic prospects continue to look good despite the economy entering a phase of lower growth than previously.

Inflation and inflation expectations have been close to 2 per cent for about two years. Although inflation is expected to temporarily fall back this year, due to the assessment that energy prices will not increase as quickly as last year, the strong economic activity in Sweden and rising inflationary pressures abroad indicate that inflation will continue to remain close to the target going forward. However, outcomes in recent months suggest that inflationary pressures are slightly weaker than expected and, overall, inflation is now expected to be somewhat lower over the next few years compared with the previous forecast.

Unexpectedly low inflation both in Sweden and abroad, low interest rates abroad and uncertainty over global developments emphasise that there is a need to proceed with caution in monetary policy. The Executive Board has decided to hold the repo rate unchanged at –0.25 per cent and assesses that the rate will remain at this level for a somewhat longer period of time than was forecast in February. The repo rate is expected to be raised again towards the end of the year or at the beginning of next year. Increases in the repo rate thereafter are expected to occur at a somewhat slower pace, compared with the assessment in February. 

The Executive Board has also decided that the Riksbank will purchase government bonds for a nominal value of SEK 45 billion from July 2019 to December 2020. This corresponds to around half of the principal payments and coupons that the Riksbank will receive from the bond portfolio during this period. The purchases will take place in order to maintain an appropriate level of holdings and the Riksbank’s presence in the market.


Thursday February 28 2019
Swedish GDP Growth Accelerates to 1-1/2-Year High
Statistics Sweden | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Swedish economy grew 1.2 percent on quarter in the three months to December 2018, recovering from a 0.1 percent contraction in the previous period and easily beating market consensus of 0.6 percent. It was the strongest pace of expansion since the second quarter of 2017 buoyed by solid increases in household consumption, government spending and exports, as well as a positive contribution from inventory changes.

Household consumption rose 0.7 percent in the fourth quarter of the year, reversing a 0.8 percent contraction in the previous period; and government spending increased 0.6 percent, following a 0.2 percent advance in Q3. In addition, net trade contributed positively to the GDP growth as exports surged 3.1 percent (vs 0.6 percent in Q3) and imports rose at a slower 1.4 percent (vs -0.5 percent in Q3). Also, changes in inventories added 0.3 percentage points to the growth. By contrast, fixed investment shrank 1.6 percent in the three months to December, after a 0.1 percent gain in the previous period.

On the production side, market production of goods and services increased 1.4 percent, recovering from a 0.1 percent decline in the previous period. Production of goods advanced 1.5 percent (vs -0.7 percent in Q3) and service-producing industries grew 1.3 percent (vs 0.2 percent in Q3). Employment measured as the total number of hours worked went up 1.6 percent and the total number of persons employed rose 0.8 percent.

Year-on-year, the GDP advanced 2.4 percent in the fourth quarter, accelerating from a 1.5 percent expansion in the previous period and also beating market consensus of 1.5 percent.




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.