Sweden Leaves Monetary Policy Unchanged


The Riksbank decided to leave the benchmark repo rate on hold at 0 percent in December, saying inflation is too low. Policymakers also said further expansionary measures were being prepared.

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

For inflation to rise towards the target sufficiently quickly and to reduce the risk of longer-run inflation expectations continuing to fall, monetary policy needs to become more expansionary. The Executive Board of the Riksbank therefore assesses that the repo rate needs to remain at zero percent for a slightly longer period than was forecast earlier. It is not until the second half of 2016, when CPIF inflation is close to 2 percent, that it will be appropriate to begin raising the repo rate. 

If monetary policy needed to become even more expansionary, this would primarily entail continuing to postpone a first increase of the repo-rate. The Riksbank is also preparing further measures that can be used to make monetary policy more expansionary. Such measures, were they necessary, could be presented at the next monetary policy meeting.

The low repo rate, together with rising demand from abroad, is expected to lead to an increase in economic activity in Sweden in the years immediately ahead. Companies will then be able to raise their prices and in this way pass on their cost increases to consumers to a greater extent. This should mean that inflation rises. The new repo-rate path means that the repo rate will remain at zero per cent until CPIF inflation is close to 2 per cent. The assessment is that it will be appropriate to begin increasing the repo rate in the second half of 2016.

If monetary policy needed to become even more expansionary, this would primarily entail continuing to postpone a first increase of the repo-rate. The Riksbank is also preparing further measures that can be used to make monetary policy more expansionary. Such measures, were they necessary, could be presented at the next monetary policy meeting.

Sweden Leaves Monetary Policy Unchanged


Riksbank | Joana Taborda | joana.taborda@tradingeconomics.com
12/16/2014 9:14:59 AM