February 14, 2017
At its first monetary policy meeting of the year on 14 February, the Riksbank decided to hold its repo rate at the record low of minus 0.50%, as expected the market had expected. The Bank also decided to extend the mandate to intervene in the FX market when deemed necessary and reaffirmed that it would continue to purchase government bonds in the first half of this year.
The latest monetary decision reflects the Bank’s commitment to prop up inflation against a backdrop of global economic uncertainty and a strengthening krona. A faster-than-expected appreciation of the krona in the fourth quarter has undermined the Bank’s efforts to shore up inflation. The appreciation of the currency was partly caused by the Bank’s hawkish stance on whether to extend quantitative easing at its 20 December meeting.
Going forward, the Bank hinted at further rate cuts and said that future rate cuts are more likely than rate hikes. The Board considered trimming the repo rate from its current record low, “if the upward trend in inflation were to be threatened and confidence in the inflation target weakened.” The Bank highlighted that expansionary policy is necessary for the economy to remain resilient and to avoid a rapid appreciation of the currency.
The next meeting is to be held on 26 April.