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Fast Comment SwedenThe Riksbank leaves the repo rate unchanged

  1. Repo rate unchanged at -0.50 percent; bond purchases unchanged
  2. Repo rate path unchanged
  3. Prepared to do more if necessary
Repo rate unchanged at -0.50 percent
Today the Riksbank announced its decision to leave the repo rate unchanged at -0.50 percent, in line with our and market expectations. Moreover, the repo rate path was unchanged, indicating a first hike in the summer of 2018. The bond purchase programme is planned to be ended in June 2017. The Riksbank still stresses the possibility to do more if the positive inflation trend should be reversed. This includes intervention in the FX markets, a mandate that was extended in today's decision. Deputy Governor Martin Flodén voted against this decision.
Minor changes in the forecasts
The Riksbank stressed the increased global political uncertainty, even if the overall macroeconomic environment is pointing upward. The CPIF forecast in the front of the curve is lifted by 0.20 percentage point, which we believe is reasonable given that the Riksbank’s previous forecast was rather low. The inflation outlook for the end of 2018 and early 2019 is more or less unchanged. There were minor changes in the other forecasts.
First hike in April 2018
Overall, the repo rate decision was very much in line with our forecast, although we think that the repo rate path could have been a more prominent issue. The forthcoming minutes could give more clues in that matter. We reiterate our view of a first repo rate hike in April 2018 and a repo rate at zero at year-end 2018. Additionally, we do not think that the bond buying programme will be extended after June 2017.

Disclaimer

Andreas Skogelid

Strategist

Fixed Income

ansk03@handelsbanken.se

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