Sweden Watch
Group Economics Macro & Financial Markets Research
16 September 2016
Change in policy bias soon? The Riksbank’s super accommodative monetary policy… Georgette Boele Co-ordinator FX & Precious Metals
… has fostered economic growth, has lifted inflation and has kept the
Strategy Tel: +31 20 629 7789 georgette.boele@nl.abnamro.com
krona weak Domestic inflationary pressures are building because of strong growth Accommodative monetary policy is no longer necessary… …but the Riksbank will be cautious to abruptly change its policy We expect a change in guidance at the end of this year… …and this should give strong support to the krona Accommodative monetary policy but for how long? Since the end of 2011, the Riksbank has eased monetary policy. It has cut interest rates into negative territory and carried out extensive purchases of government bonds. At the end of 2016 these purchases will amount to SEK 245 billion. In its latest monetary policy report the following arguments are used to keep monetary policy accommodative: -
uncertainty abroad,
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moderate pace of the global economy,
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low inflation in many countries and
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expansionary monetary policy abroad.
Repo rate cut into negative territory %
10.0 8.0 6.0 4.0 2.0 0.0 -2.0 96
98
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02
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16
Riksbank repo rate Source: Riksbank, Bloomberg
The Riksbank has also recognised that domestic economic growth has been strong, inflation is rising and the labour market is strengthening. The central bank is a flexible
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