Sweden Keeps Key Rate At Zero
11 Febrero 2020 - 11:13PM
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Sweden's central bank maintained its key interest rate, after
lifting it from negative territory in December, and signaled that
rates will remain zero for a prolonged period.
The Executive Board of Riksbank decided to keep its repo rate
unchanged at zero percent, as widely expected, on Wednesday.
The repo rate remained negative since the start of 2015 until
December 2019, when it was raised by 25 basis points to the current
level. The forecast for the repo rate was also the same as
projected in December. The repo rate is expected to remain at zero
percent during almost the entire forecast period, the bank
said.
The chances of a rate cut in the near-term seem fairly low,
James Smith and Petr Krpata, economists at ING, said. Barring a
material worsening in the outlook, policymakers will be wary of
taking the repo rate into negative again so soon after raising
it.
The central bank will continue to purchase government bonds for
a total nominal amount of SEK 45 billion, until December 2020.
Policymakers said the unusually mild winter and lower oil prices
are contributing to falling energy prices, keeping inflation low in
2020.
The bank downgraded its inflation outlook for 2020 to 1.4
percent from 1.8 percent and kept the projection for 2021 at 1.8
percent, and that for 2022 at 2.1 percent.
At the same time, the bank lifted its growth projection for this
year to 1.3 percent from 1.2 percent and that for 2021 to 1.8
percent from 1.7 percent. GDP is forecast to grow 2 percent in 2022
versus the previous forecast of 1.9 percent.
According to Riksbank, GDP growth will be moderate this year and
then increase gradually from the end of 2020 when demand abroad
stabilizes at the same time as investment and consumption in Sweden
increase slightly more rapidly.
"The effects of the coronavirus are expected to reduce global
growth in the short term, but it is difficult at present to fully
assess the economic consequences," Riksbank said.
The board assessed that measures within housing and tax policy
and appropriate macroprudential policy are required to reduce the
risks associated with high household indebtedness.
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