Riksbank keeps monetary policy on hold, may hike interest rates in September 2019

The Swedish central bank kept its repo rate on hold today at -0.25 percent. The rate path and the QE program was kept unchanged as well, as was widely expected. The end-point for the rate path is higher at 1.10 percent as the rate path now includes first quarter 2022. Today’s decision was unanimous for the first time in over one year. This implies that the Riksbank is in no hurry of tightening monetary policy.The Swedish central bank’s currency mandate was not extended, reflecting the subdued SEK and the new game plan for the exchange rate and is therefore of less significance, noted Nordea Bank in a research report. The mandate, which expired this week, enabled a swift intervention on the exchange market to prevent an excessively rapid appreciation of the exchange rate, which could in turn bring down inflation.

The rate path suggests only a small possibility of a rate hike at the next meeting in April. According to Nordea Bank, the Riksbank might hike interest rates in September 2019.

The economic forecasts were downwardly revised by the Riksbank, but it remains too optimistic. Meanwhile, the inflation forecast was almost unchanged and appears confidence that inflation will continue to be at the 2 percent target.

“All in all, todays message didn’t come with any major surprises. The Riksbank has more work to do as for economic forecasts. We expect the bank to trim its inflation forecast going forward and also to revise down its too optimistic view on the growth outlook”, added Nordea Bank.