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Fast Comment SwedenRiksbank monetary policy decision: A dovish end to QE, as expected

  1. The end of QE - but the Riksbank will be very active in the bond market in 2018 and 2019
  2. Dovish communication did not include a change in the repo rate forecast, but we stick to our forecast for a September hike
  3. Reservations against the aggressive reinvestment plan
The end of QE - but the Riksbank will be very active in the bond market in 2018 and 2019
Fully in line with expectations, the Executive Board (EB) decided to keep the repo rate at -0.50 percent. Also in line with the consensus base case scenario, the EB decided to end QE as of year end 2017. That is, no decision was made on future additional net purchases of government bonds. However, just like before, the Riksbank will reinvest maturities and coupon payments in the government bond portfolio until further notice. In addition, the EB has decided to bring forward a majority of the reinvestments of the large maturity in March 2019. This means that reinvestments will start in January 2018 and run until the middle of 2019, much in line with what we were expecting.
Dovish communication did not include a change in the repo rate forecast, but we stick to our forecast for a September hike
We had expected the EB to pair its decision to end QE with a dovish tone in its communication. While doing so through the reinvestments in its portfolio, the EB kept its verbal guidance that the first rate hike will come in "the middle of 2018". We had expected a slight pushing-back of the first hike to soften the message. Now, the mix turned out differently, but overall we see this as being in line with our forecast for a repo rate hike in September 2018.
Reservations against the aggressive reinvestment plan.
Deputy Governors Martin Flodén and Henry Ohlsson entered reservations against the decision to begin reinvesting in January 2018 the bonds that mature in 2019. Apart from that, the EB was united in this decision.

Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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