Sweden Leaves Rates Unchanged


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.

Sweden Leaves Rates Unchanged


Sveriges Riksbank | Joana Taborda | joana.taborda@tradingeconomics.com
2/13/2019 8:48:23 AM