The Swedish crown recovered from an initial dip after Sweden’s central bank expanded its asset purchase programme but declined to add a fourth interest rate cut to this year’s tally, trading up 0.6 percent at 9.3390 crowns per euro.
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“Still, improving Swedish growth outlook, rising capacity utilization and slightly higher inflation suggest that the Riksbank will find it increasingly hard to match ECB monetary policy in 2016”, said Olle Holmgren of SEB bank. The euro inched up to $1.10650, still close to a 2-1/2-month low of $1.0989 hit last week after the European Central Bank signalled it would expand its stimulus programme in December. This contributes to long-term inflation expectations that are compatible with the inflation target.
What hasn’t been responding so much to the Riksbank’s extremely aggressive monetary policy is inflation. Forecasts were for zero inflation.
The Swedish central bank said it remained ready to make new policy decisions at short notice if needed.
“This depends on poorer inflation prospects overseas as well as on a new assessment that demand needs to be stronger in Sweden in order to stabilise inflation”.
The recovery overseas is continuing but there is uncertainty regarding the strength of the global economy.
Though the Riksbank cut rates earlier this year, sending its benchmark rate to -0.35% in July, it held rates on Wednesday.
Failure to do so “may ultimately be very costly for the national economy”, it said. The minutes from the Executive Board’s monetary policy discussion will be published on 10 November.
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Riksbank Governor Stefan Ingves said on Wednesday the upturn in inflation can be volatile, jumping around from month to month, urging all to focus on the trend. “The press conference will be broadcast live on the Riksbank’s website, www.riksbank.se, where it will also be available to view afterwards”.
