- The repo rate is unchanged during the third quarter of 2024
- No change in the plans for the balance sheet
- The Riksbank closes the emergency lending facility
STOCKHOLM, September 21 (Reuters) – The Swedish central bank kept key policy unchanged on Tuesday and predicted that the benchmark repo rate would remain zero in the coming years, which showed no signs of being in a hurry to tighten monetary conditions despite a rapid recovery from the pandemic.
Sweden’s gross domestic product is back to its pre-pandemic size, inflation has reached the 2% target and with public restrictions ending, growth is expected to remain strong. Read more
However, fiscal and monetary policy remains extremely loose and the Riksbank is reluctant to change course. Read more
“It is important that … we continue with expansive monetary policy so that inflation sustainably reaches our 2% target,” Governor Stefan Ingves told reporters.
The Riksbank adjusted its policy and said that lending facilities launched during the pandemic would be closed immediately and the requirements for pre-pandemics reintroduced at the end of the year.
The central bank said it expected to close asset purchases by the end of this year and keep its balance sheet more or less unchanged by 2022, in line with its previous guidelines.
Analysts in a survey by Reuters had not predicted any change in interest rate policy or plans for the balance sheet.
– The Riksbank sees less risk of stimulating too much than reducing stimulus measures too early, says Nordea economist Torbjorn Isaksson.
With the effects of pandemic migration and inflation gaining momentum, central banks around the world are facing tough decisions on when to begin weaning economies from emergency aid. Read more
Inflation in Sweden reached 2.4% in August and is likely to peak at 3% in the coming months before easing again next year.
The Riksbank can tighten its policy if inflation risks exceeding the target significantly and persistently, but an investigation would be more difficult to handle, Ingves said.
“In that case, we are talking about negative interest rates or some such and many people feel uncomfortable with it,” said Ingves.
Norway is likely to be the first of the G10 group of developed economies to pull the trigger, with markets expecting it to begin a series of hikes on 23 September.
The US Federal Reserve may begin reducing its bond purchases later this year. Read more
Edited by Nick Macfie
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