Riksbank expands QE and signals more

The Riksbank kept its repo rate unchanged at -0.35% and decided to expand its QE programme, broadly in line with expectations. 

Citing considerable global uncertainty and rising expectations that central banks abroad would likely pursue even more expansionary monetary policy, the Riksbank decided to expand its QE programme by SEK65bn to June 2016, so that total purchases will amount to SEK200bn. 

"The size of QE expansion was more than initial estimated, of SEK40-50bn and will last longer than previously expected. The policy rate was left unchanged at -0.35%, although, importantly, the projected repo rate path has been revised lower to -0.4% in 2016 (-0.3% in the September MPR) and -0.1% in 2017 (0.2% in the September MPR), signalling an additional repo rate cut", says Barclays. 

Despite the larger-than-expected QE expansion and dovish revisions to the repo rate, the SEK strengthened as markets continue to question the need for additional monetary policy stimulus by the Riksbank due to solid domestic fundamentals, the recent meaningful uptick in inflation and inflation expectations and the currency's undervaluation.