In 2015, Sweden’s economy expanded strongly. The economic expansion is expected to have been over two-folds than of the euro area. Capital investment, export sector and domestic demand all expanded strongly. The Swedish economy is expected to keep expanding strongly as the continued expansionary monetary policy will continue to give additional support to the economy, noted Commerzbank. Hence, the Swedish economy is likely to expand at around the same rate as in 2015, added Commerzbank. Meanwhile, inflation is showing certain positive signs. Inflation had reached close to zero percent in late 2015, whereas in March, it accelerated to 0.8%.
Meanwhile, the Swedish central bank was attempting to keep the krona from gaining quickly against the EUR. This will decelerate the rise in price and therefore risk the 2% inflation target. This indicates that the bond buying program and reductions in interest rates were implemented as a response to the monetary policy of ECB, noted Commerzbank. With the softening of euro area’s growth and inflation outlook, the ECB’s monetary policy has become even more expansionary. This risks the EUR to greatly depreciated, even against the Swedish krona. However, Riksbank’s measures in February were a preventive step against the ECB’s measures.
Riksbank is expected to further loosen its monetary policy if there are any risks of SEK gaining rapidly and markedly against the EUR, according to Commerzbank. The central bank has mentioned that it is ready to further lower its key rate, extend its bond buying program and even intervene in the FX market.
