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Sweden Monetary Policy February 2024

Sweden: Riksbank holds again in January

At its first scheduled meeting of the year on 31 January, the Riksbank once again held the policy rate at 4.00%. The pause, which mirrored November’s decision, had been penciled in by markets. Moreover, the Riksbank announced that nominal government bond sales would increase to normalize the Bank’s balance sheet: Starting 1 February, it will sell SEK 5.7 billion per month instead of SEK 4.2 billion.

The hold was primarily driven by the need to keep monetary policy restrictive to continue driving inflation down and anchor it around the Bank’s 2.0% target. The hold was a cautious decision: The Riksbank acknowledged upside risks to the inflationary outlook remained, including supply shocks due to geopolitical tensions and a renewed steep weakening of the krona.

The Riksbank’s tone in its latest communiqué was more dovish: The Bank assessed a diminished risk of inflation becoming entrenched at too high a level and stated that the policy rate could be lowered sooner than it had anticipated in its November 2023 meeting.

While some of our panelists see the Riksbank cutting rates as soon as Q2, the majority don’t expect it to embark on a loosening cycle until Q3. The next meeting is scheduled for 26 March, with the decision to be announced the following day.

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