Sweden Central Bank Expands QE, Holds Rate
July 01 2020 - 12:19AM
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Sweden's central bank expanded its quantitative easing and
maintained interest rate at zero to support recovery and lift
inflation as the coronavirus pandemic substantially hurt the
economy.
The executive board of Riksbank decided to expand the asset
purchases programme to SEK 500 billion from SEK 300 billion. The
programme will continue until the end of June 2021.
The bank left its repo rate unchanged at zero percent and
signaled that it is prepared to take the rate to negative zone.
The board further decided to cut interest rates and extend
maturities for lending to banks.
Riksbank will purchase government bonds, mortgage bonds and
municipal bonds for SEK 100 billion between October 1 and December
31. The bank will offer to purchase corporate bonds for SEK 10
billion up to June 30, 2021.
"All in all, the Riksbank's measures mean that there will be
comprehensive monetary policy stimulus in the form of low interest
rates and a large amount of liquidity for the foreseeable future,"
the bank said.
These measures would create the conditions for a recovery in the
Swedish economy and will help inflation rise towards the target of
2 percent towards the end of the forecast period, the bank
added.
The unemployment is expected to continue rising and inflation is
set to take time before returning to the target, Riksbank
observed.
The central bank forecast inflation to slow to 0.5 percent this
year, before rising to 1.4 percent in 2021.
Even if the economy gradually recovers in the coming years, it
will take some time before resource utilization in the Swedish
economy, Riksbank said. GDP is expected to shrink 4.5 percent in
2020 but expand 3.6 percent next year and 4.1 percent in 2022.
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