Swedish Central Bank Maintains Rate

At its September, 4th meeting, the Executive Board of the Riksbank decided to maintain the repo rate at 0.25 percent, as inflation has been a bit higher than expected in recent months. The central bank also said that rate increases are not expected to begin until the end of 2015.

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

In Sweden, inflation remains low, but has been a little higher than expected in recent months. The forecast for inflation in the near term has been revised upwards slightly as the result of a weaker krona and somewhat higher labor costs. The low repo rate will contribute to demand in the economy increasing, which will cause inflation to rise. As in July, the forecast is that CPIF inflation will attain 2 per cent at the beginning of 2016.

The overall picture of the economic outlook and inflation prospects for Sweden remains largely unchanged since the July Monetary Policy Report. The repo rate needs to remain low for a long period of time for inflation to rise towards the target. It is therefore being held unchanged at 0.25 per cent. As in the previous forecast, it is assessed to be appropriate to begin raising the repo rate towards the end of 2015, when inflation is clearly higher.

The weaker international developments abroad mean that the repo-rate path is marginally lower from the middle of 2016, compared with the assessment made in July. At the end of the forecast period, the repo rate is expected to be just over 2 per cent. From an historical perspective, this is an unusually low repo rate in a stage where economic activity is relatively good and CPIF inflation is close to 2 percent.

The low interest rates still entail risks linked to the high level of household indebtedness. Reducing these risks requires further measures aimed directly at household demand for credit. In addition, reforms are needed for a better-functioning housing market. The responsibility for this lies with the Government and other public authorities.

Swedish Central Bank Maintains Rate

Riksbank l Rida l rida@tradingeconomics.com
9/4/2014 11:46:58 AM