MNI: Riksbank Sees Some Difference Of Opinion On QE Extension

--December Meeting in Focus; Maintain Wait-And-See Stance

By Kieran Williams

     LONDON (MNI) - There was a difference of opinion amongst Riksbank Executive

Board Members  at the October 25 meeting over whether the purchase of government

bonds should continue beyond the end of 2017, according to the latest Riksbank

minutes published Thursday.

The minutes showed that "all of the members noted that a continued expansionary

monetary policy was needed for inflation to remain close to 2 per cent going

forward," but also cited "slight differences of opinion" over the extension of

QE.

Deputy Governor Martin Floden said that "he does not expect to advocate an

extension to the programme at the meeting in December," according to the minutes

citing benign conditions and rising inflation expectations. This view was

supported by Cecilia Skingsley.

A dovish turn was taken by Riksbank Governor Stefan Ingves who said that the

board should "await further information that may influence a decision in

December to possibly extend purchases," a view that was shared by Kerstin af

Jochnick.

Inflation remains a key focus for the Riksbank. "In Sweden, economic activity is

strong. CPIF inflation has risen and, like inflation expectations, is close to 2

per cent. However, part of the recent upturn in inflation is explained by

temporary factors and inflation is therefore expected to fall back somewhat in

the coming months," the minutes showed.

The September CPIF print at 1.9% was 0.3ppts lower than the Bank's forecast, as

a result the Bank note that they have revised lower the forecast for inflation

in the coming months. Several board members did note though that lower inflation

and strong economic activity had caused some appreciation in the krona which

should exert some upward pressure on inflation.

With this in mind the board extended the mandate for quick intervention on the

foreign exchange market. Floden and Henry Ohlsson did not support this decision

saying respectively that the impact of FX intervention was dubious and that

intervention was not necessary. 

The minutes bring the December meeting into focus for the future of the QE

programme. According to the minutes all members "agreed that there is time to

await further information that may be important for a decision on a possible

extension at the December meeting."

The first rate increase is still expected to come in mid-2018, maintaining the

assessment from the September meeting.

The minutes confirm the wait-and-see stance that was evident in the Monetary

Policy Report on October 26. The minutes stated that "the Executive Board agreed

on the picture of economic development and the inflation outlook described in

the draft Monetary Policy Report."

--MNI London Bureau; +44 203 865 3809; email: kieran.williams@marketnews.com

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