Riksbank keeps repo rate on hold at -0.5%, to expand QE program

The Swedish central bank kept its repo rate on hold at -0.5% today, on par with expectations. Furthermore, the Riksbank decided to expand the QE program by SEK 45 billion to H2 2016. The central bank plans to purchase nominal government bonds worth SEK 30 billion and index-linked bonds worth SEK 15 billion. Meanwhile, the Riksbank kept its rate path unchanged, indicating that the central bank maintained the short-term easing bias in the rate path and that it is expected to first hike rate in Q2 2017, noted Nordea Bank.

The central bank did not make any major changes to the macro outlook. Riksbank projects CPIF-inflation to average 1.4% in 2016 and 2% in 2017, as compared with earlier forecast of 1.3% and 2.1% in 2016 and 2017 respectively. Meanwhile, it projects the economy to expand 3.7% this year and 2.7% next year, as compared with earlier expectations of 3.5% in 2016 and 2.8% in 2017.

The central bank is unlikely to ease measures further in this cycle and is expected to first raise rate in the second quarter of 2017, noted Nordea Bank. The central bank emphasized that the program of buying government bond can be further expanded. Moreover, it stressed that the repo rate can also be additionally lowered.