Sweden: Riksbank keeps rates on hold, hints at possible upcoming cut
April 9, 2014
At its 9 April monetary policy meeting, the Central Bank (Riksbank) announced that it would hold the repo rate unchanged at 0.75%, in a decision that matched market expectations. The Bank stated that the economic outlook is improving amid increasing economic activity, “at home and abroad.” The Bank noted that strong demand pushed GDP to unexpectedly high levels towards the end of last year and explained that prospects for the future remain bright amid a strong external sector and strengthening labor market. Despite these positive signs, inflation is expected to remain low for the remainder of this year. Within this context, it is highly unlikely that monetary authorities will raise interest rates in the coming months. According to Riksbank, the repo rate must be kept low in order to enable inflation to reach the target of 2.0%, which will only be attained in the latter part of 2015. In fact, the Riksbank hinted at the possibility of a rate cut in the future to minimize the risks of deflation. According to the accompanying statement, “the repo-rate path has been adjusted down somewhat and reflects a greater probability of a repo-rate cut in the near term compared with the assessment made in February.” The next monetary policy meeting will be held on 3 July. Riksbank projects that the average repo rate will be 0.70% in 2014 and 1.10% in 2015. FocusEconomics Consensus Forecast panelists see the repo rate at 0.82% in 2014 and at 1.46% in 2015.
Author: Carl Kelly, Economist