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Sweden Monetary Policy April 2021

Sweden: Riksbank keeps monetary policy unchanged at April meeting

At its meeting on 27 April, the Riksbank kept its monetary policy unchanged, maintaining its key repo rate at 0.00% and continuing its asset purchasing program.

The decision reflected controlled inflation expectations for the year and a stronger-than-expected economic recovery in the first quarter of 2021. As such, the Bank continues to have space to maintain its accommodative stance and provide liquidity to bolster activity. To this end, the Bank continued its asset purchasing program—due to run until the end of the year—with the total nominal amount staying unchanged from February’s meeting at SEK 700 billion.

Looking ahead, the Riksbank reiterated its dovish stance in its communiqué, stating that it will ensure “there is extensive monetary policy support for as long as necessary in order to support the recovery and inflation”.

Reflecting on the outlook for the repo rate, Knut Hallberg and Cathrine Danin, analysts at Swedbank, commented:

“All in all, the monetary policy decision today was well in line with our expectations. We maintain our call for an unchanged monetary policy stance in the near term, especially as inflation will trend higher. However, the risk picture is still tilted somewhat towards a rate cut after the summer if the economic and inflation outlook worsens.”

Commenting on the impact on the krona, James Smith and Petr Krpata, economists at ING, stated:

“In contrast to Norway’s krone and the Norges Bank, the Riksbank won’t provide any tailwinds to SEK this year. Yet, we still expect EUR/SEK to move below the 10.00 level this summer as the currency will benefit from the improving eurozone economy and a more synchronised global economic recovery in the second half. Recall that Sweden is a small open economy levered to global growth, which SEK should in turn benefit from, even if the Riksbank remains cautious and keeps rates at zero this year and next.”

The next monetary policy announcement will be published on 1 July.

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