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MNI: Sweden Riksbank Leaves Key Repo Rate At -0.50% - Text
--First Riksbank Hike Still Not Seen Until Towards End-2018
LONDON (MNI) - Sweden's Riksbank has decided to leave the key repo rate
unchanged at -0.5% at Monday's meeting, with bond buying plans left unchanged.
The central bank again said that it doesn't expect to raise rates until towards
the end of the year.
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The full text of the Riksbank announcement follows:
Repo rate unchanged at -0.50 per cent
Economic activity is strong and inflation is close to the target of 2 per cent.
As earlier, however, inflationary pressures are moderate. Monetary policy needs
to continue to be expansionary for inflation to remain close to target. The
Executive Board has therefore decided to hold the repo rate unchanged at -0.50
per cent. The forecast for the repo rate is also unchanged and indicates as
before that slow repo rate rises will be initiated towards the end of the year.
International economic activity is strengthening but uncertainty has
increased
Economic developments abroad remain favourable. However, uncertainty over future
developments has risen as a result of factors such as increased trade
restrictions and economic policy developments in Italy. Inflation abroad is
moderate but will rise this year due to higher oil prices. Normalisation of
monetary policy abroad is taking place slowly.
Strong Swedish economic activity, moderate inflationary pressures
In Sweden, economic activity is high, the labour market strong and inflation on
target. As in other countries, higher energy prices have contributed to rising
inflation. The krona exchange rate has developed more weakly than expected and
together with more rapid energy price increases, this will contribute to higher
inflation in the year ahead compared with in the previous assessment. In the
longer term, however, the forecast for CPIF inflation is unchanged.
Measures of underlying inflation, which provide an indication of where
inflation is heading, still suggest that inflationary pressures are moderate.
For inflation to remain close to 2 per cent in the period ahead, it is important
that economic activity continues to be strong and has an impact on price
increases. The exchange rate is expected to strengthen gradually in the coming
years but there is uncertainty surrounding the forecast. It is important that
the krona exchange rate develops in a manner compatible with inflation remaining
close to target.
Expansionary monetary policy for continued on-target inflation going
forward
Overall, the Executive Board deems it appropriate to keep monetary policy
unchanged. The Executive Board has therefore decided to leave the repo rate at
-0.50 per cent. The forecast for the repo rate is also unchanged and indicates
as before that slow repo rate rises will be initiated towards the end of the
year. The Riksbank's holdings of government bonds amount to about SEK 330
billion, expressed as a nominal amount. Until further notice, redemptions and
coupon payments will be reinvested in the bond portfolio.
If the conditions for the development of inflation were to change, the
Executive Board is prepared to adjust monetary policy. The risks of excessively
low inflation merit particular attention, as at the prevailing interest rate
levels, excessively low inflation is more difficult to manage than excessively
high inflation.
The Executive Board has also decided to extend the mandate that facilitates
rapid intervention on the foreign exchange market. The krona has weakened in the
past year. But in the years ahead, it is expected to strengthen and the exchange
rate remains a source of uncertainty as regards the development of inflation. An
excessively rapid appreciation of the krona would make it more difficult to
stabilise inflation.
Important to have measures to reduce the risks associated with household
indebtedness
The low interest rates are exacerbating the risks linked to high and rising
household indebtedness, while the fundamental causes of the high indebtedness
still remain. Achieving long-term sustainable development in the Swedish economy
therefore requires measures within housing policy, taxation policy and, where
necessary, macroprudential policy.
Deputy Governor Martin Floden entered a reservation against the repo rate
path in the Monetary Policy Report. He advocated a repo rate path that indicated
an initial increase of the repo rate by 0.25 percentage points in September or
October this year but that coincided with the report's repo rate path as from
the third quarter of 2019.
Deputy Governor Henry Ohlsson entered a reservation against the decision to
maintain the repo rate at its current level and against the repo rate path in
the Monetary Policy Report. He advocated raising the repo rate to -0.25 per cent
with reference to the strong economic growth in Sweden and abroad.
Deputy Governors Martin Floden and Henry Ohlsson entered reservations
against the decision to extend the mandate for foreign exchange interventions.
Mr Floden cited the same reasons as he did regarding previous decisions on the
mandate. Mr Ohlsson considered that in a situation with inflation and inflation
expectations close to the target level, potential interventions on the foreign
exchange market can be managed without a special mandate.
The decision on the repo rate will apply from 4 July 2018. The minutes from
the Executive Board's monetary policy meeting will be published on 12 July.
Further information on the Executive Board's decision on the mandate for foreign
exchange interventions can be found in a separate annex to the minutes at
www.riksbank.se. A press conference with Governor Stefan Ingves and Jesper
Hansson, Head of the Monetary Policy Department, will be held today at 11 a.m.
in the Riksbank. Press cards must be shown. The press conference will be
broadcast live on www.riksbank.se.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.