MNI REVIEW: Riksbank Ups QE; Projects Repo Rate Flat To 2023

--QE Envelope Increased To SEK 500 bn From SEK 300bn

--Collective Forecast Shows Repo Rate Stuck At Zero

By David Robinson

     LONDON (MNI) - The Riksbank raised its ceiling for asset purchases to

SEK500 billion from SEK300 billion and cut rates on bank loans but did not

return to setting a negative interest rate, leaving the Repo Rate unchanged at

0%.

     The collective rate projection showed it the rate staying at zero until the

end of the forecast period in Q3 2023. 

     The central bank had plenty of room before hitting the original SEK300

billion asset purchase ceiling, having only bought SEK130 billion so far, but

raising it now makes clear that it is in for a prolonged spell of quantitative

easing.

     Asset purchases would be made up until June 30 2021, with the SEK500

billion total to be maintained at that level by topping up maturing assets,

Wednesday's statement said.

     The Riksbank, which started the corona pandemic as the biggest holder of 

Swedish government debt, has been carrying out QE purchases across a wide range

of other assets and said it would add corporate bonds to the eligible list.

     Purchases of government bonds, covered bonds and municipal bonds would

total SEK 100 billion in Q4, the Riksbank said, and will offer weekly purchases

of commercial paper up to SEK 32 billion. It said full details on the types of

bonds it would buy would be unveiled later.

     --CHEAPER CORPORATE LOANS

     The bank also announced a cut to the interest rate charged on corporate

loans of up to SEK 500 billion that it has made available via banks and other

monetary policy counterparties.

     If lending banks meet the Riksbank's lending goals the rate on the loans

will be cut from the current 0.2% to 0.1% and the maturity on the loans has been

extended to up to four years.

     --OUTLOOK

     The Riksbank's forecasts showed that it expected the Covid-19 shock to

result largely in disinflationary pressure, with the target CPIF measure

inflation shown falling from 1.7% in 2019 to 0.4% in 2020 before rising to 1.4%

in 2021 and staying at 1.4% in 2022, all below the 2.0% target.

     GDP was forecast to fall 4.8% in 2020 before partially recovering in 2021,

rising by 3.5%, and then increasing by 4.1% in 2022.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$E$$$,MT$$$$,MX$$$$]