Sweden: Riksbank cuts the repo rate by 25 percentage points
December 17, 2013
At its 17 December monetary policy meeting, the Central Bank (Riksbank) decided to cut the repo rate by 25 basis points, from 1.00% to 0.75%. The decision was widely expected by the markets. This is the first meeting in which the Bank has cut the repo rate following five consecutive meetings in which the rate was kept on hold. The next monetary policy meeting will be held next year on 12 February.
According to the Bank, the Swedish economy is expected to pick up moderately next year, mainly do to a slow recovery in the euro area. Therefore, the increasing demand from abroad and the improving domestic demand will improve the labor market and decrease the unemployment rate. Regarding price developments, Riksbank acknowledged that, "inflation has recently been unexpectedly low, with weak developments in prices of goods and services." As a result, a flexible monetary policy, "will contribute to an increase in resource utilization in the economy."
Riksbank projects that the average repo rate will be 0.70% in 2014. FocusEconomics Consensus Forecast panelists see the repo rate at 1.23% in 2014.
Author: Dirina Mançellari, Senior Economist