PBoC to maintain prudent monetary policy but with flexibility to ensure reasonably adequate liquidity, says Scotiabank
Riksbank keeps repo rate on hold at 0.00 pct, likely to remain unchanged until Q2 2022
The Swedish central bank, Riksbank, kept the repo rate on hold today at 0.00 percent and hinted at an unchanged repo rate until the second quarter of 2022. The central bank did not give any news regarding its purchases of government bonds, as anticipated.
The Riksbank’s rate path has a higher endpoint at 0.18 percent as the path includes the first quarter 2023. Otherwise, the rate path was intact compared to the December report. The Riksbank was unanimous in its decisions.
The central bank cut down the CPIF-inflation forecast significantly. The trough for CPIF-inflations is 1.2 percent this autumn, and the annual average for CPIF has been lowered to 1.3 percent for 2020, from 1.7 percent in the December report.
The Riksbank is not suggesting any easing bias in spite of the changed inflation outlook. This is slightly hawkish but it is consistent with the headline scenario that Riksbank will remain on hold for the near future, said Nordea Bank in a research report. The projection for core inflation was slightly cut too, but is still higher than expectations.
As anticipated, there are only small changes of the economic forecasts, except for the projection for CPIF-infation. The central bank concludes that resource utilization has weakened a bit but that the overall economy stays sound. This in turn signifies that inflationary pressures should rise going forward, although the bank sees some downside risks. The coronavirus is mentioned but has not major effect on the outlook.
“All in all, we see the repo rate unchanged at 0.0% both this year and next year. Also, we do not expect the bank to launch any other stimulus measures. Today’s report strengthens that view”, said Nordea Bank.
The central bank played down the fall in energy prices. But low headline inflation might be a headache for the Riksbank as it possibly will pull down inflation expectations. Therefore, the credibility for the 2 percent target might be at risk.
“Although the bar for launching stimulus measures should be higher than normal, the risk to our forecast on the Riksbank is tilted towards rate cuts or an expansion of the QE programme later this year”, added Nordea Bank.