The Swedish central bank, Riksbank has reacted to the recently disappointing inflation print and in its October meeting hinted at its willingness to further ease monetary policy. It is worried that inflation would take much longer to reach the target rate, noted Commerzbank in a research report. Looking at the recent developments, the central bank stated that interest rates would continue to stay at low levels until early 2018. Moreover, it also said that it might extend its bond buying program even before its next meeting in December.

This might enable it to respond efficiently to the European Central Bank’s monetary policy decision on 8th December that in turn has hinted at an intention to extend the bond purchase program, said Commerzbank.

The central bank, after a weak inflation data and in spite of a subdued krona will not want to risk a solid of rapid strengthening of the SEK against the euro. As the SEK has remained weaker against the EUR since May, the Swedish central bank had left its bond buying program unchanged since April meeting. Riksbank is now ready to implement additional measures again should the outlook of inflation bet at risk, added Commerzbank.

The central bank’s strategy, so far, of preventing an excessively rapid appreciation of the SEK has worked well. It has paid off that the central bank usually loosed its monetary policy pre-emptively thus showing that it responds quite sensitively to risks to inflation. Worries regarding rising global protectionism and attractiveness of the Swedish krona as a financing currency for carry traders are expected to have resulted in depreciation of the SEK since summer.