Riksbank meeting minutes indicate dovish stance, extension of QE program in December unlikely

The Riksbank October meeting minutes were released today. The minutes highlight that the central bank continues to be rather soft although an extension of the QE program in December now appears unlikely, noted Nordea Bank in a research report.

The minutes show that the central bank welcomes that inflation continues to be close to the target, but it also recognizes that there are transitory factors at play and therefore it is not the time to lean backward yet. Moreover, many governors continued to highlight that undershooting is worse than an overshooting of the inflation target.

There were a few differences of opinion among the Board members as to whether the purchases of government bonds should be extended beyond this year. Governor Flodén stated that he would like to wait until December to make the decision but also that he “does not expect to advocate an extension to the program during the meeting in December”.

Several members talked about the housing market’s recent developments. But the talks mostly touched upon structural matters and several governors welcomed the increase in supply. However, Governor Flodén expressed some concerns regarding the possible impacts on the overall economic outlook and inflation. Therefore, current wariness about the housing market implies that the Swedish central bank should cautiously move ahead.

Overall, the minutes affirm the central bank’s weak stance although the possibility for an extension of the QE program already in December appears to be low. Following the October meeting of Riksbank, the European Central Bank delivered a rather soft message.

“We stick to our forecast of a first repo rate increase in October 2018 and two additional hikes in 2019, leaving the repo rate at 0.25 percent at the end of 2019”, added Nordea Bank.

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