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Riksbank Review - July 2020: QE Now

MNI Point of View:

The repo rate was kept on hold as expected with the repo rate path at zero until the end of the forecast horizon. Verbal guidance included that rates can be cut too - also as expected. No analysts see a cut to the repo rate in their base case.

The surprise was that QE was extended by SEK200bln - that's the top of the range of expectations and most hadn't expected an announcement until September. Purchases will continue until June 2021 (rather than the end of this year). Corporate bonds being included from September in the Riksbank's purchases was something that had been considered a possibility but also wasn't expected this month either (although we note only SEK10bln of the purchases will be of corporates).

The Riksbank has also cut rates on its programme of lending to banks (its version of the Term Funding Scheme). And it has extended the term of loans from a maximum of two years to a maximum of four years.

So overall this is pretty much as dovish as the Riksbank could have been expected to be today. And given how much the Riksbank has delivered, there are no real expectations of any further changes to policy for the foreseeable future.

Click here for the full Riksbank Review or see attached below:

MNI_Riksbank_Review_-_Jul20.pdf

Central Bank ReviewHomepageRiksbank - ReviewCentral Bank ReportsMarkets

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