Sweden Benchmark Interest Rate Unchanged at 1.0%


The Executive Board of the Riksbank has decided to hold the repo rate unchanged at 1.0 percent and to make a downward adjustment to the repo-rate path. Increases in the repo rate are not expected to begin until the second half of 2014.

Excerpt from the statement by the Executive Board of the Riksbank:

After a weak outcome at the end of last year, the Swedish economy is now showing a gradual recovery. Sentiment among households and companies has improved and consumption and investment are expected to increase more quickly in the coming period. The brighter prospects for the Swedish economy, together with low interest rates, have contributed to an increase in housing prices. Inflation is currently low, which is due to weak demand in the economy, to the appreciation of the krona in recent years and to low price mark-ups by companies. As economic activity strengthens, inflation will rise, but is now expected to take longer before inflation attains the target of 2 per cent.
 
The repo rate needs to remain at a low level for a longer period of time to support the recovery to ensure that inflation rises towards the target. The Executive Board of the Riksbank has therefore decided to hold the repo rate unchanged at 1 per cent and to make a downward adjustment to the repo-rate path. Gradual increases in the repo rate are not expected to begin until the second half of 2014, which is around a year later than the earlier forecast.
 
Over the past year, the repo rate has been gradually cut to 1 per cent and monetary policy is currently very expansionary. There are now signs of a gradual recovery in the economy, at the same time as household debt is expected to increase from an already high level. However, it will take longer than was previously assumed before inflation rises towards the target. An even lower repo rate today would mean that inflation attained the target somewhat more quickly, but at the same time it would further increase the risk of imbalances building up. The monetary policy conducted is expected to stimulate the economy and inflation at the same time as taking into account the risks linked to households' high indebtedness.
 
Developments in the euro area are a source of uncertainty, as are developments in the exchange rate and the companies' possibility to pass on costs to consumers. If economic developments and inflation in Sweden were to develop differently from the forecasts in the Monetary Policy Update, the repo rate and repo-rate path would need to be adjusted accordingly.

Sweden Benchmark Interest Rate Unchanged at 1.0%


Nuno Fontes | nuno@tradingeconomics.com
4/17/2013 8:43:44 AM