9 Jan 2015
Riksbank hints at quantitative easing - UBS
FXStreet (Córdoba) - The minutes of Sweden's Riksbank meeting on 16 December brought no major surprises and reiterated that the central bank is preparing ‘potential non-conventional measures, which, if the need arises, could be presented at the next monetary policy meeting’. In UBS analysts’ view, there is a high risk that the next meeting on 12 February will bring renewed monetary policy easing.
Key Quotes
“Falling Swedish inflation expectations, lower oil prices, and lower inflation in the Eurozone indicate that the Riksbank needs to ease further”.
“We believe that, besides strengthening forward guidance, the most likely measure would be launching an asset-purchase program. This might seem counterintuitive in a country where the economy is expected to grow by 2.5% in 2015. However, the fact that Swedish inflation has been close to zero for over two years now highlights the risk that the Riksbank's 2% inflation target will lose its credibility permanently”.
“Riksbank Governor Stefan Ingves said in the minutes that ‘the Riksbank will have to work with quantities’ and will have ‘to make sure that the Riksbank's balance sheet grows,’ since its key policy rate is now already at zero”.
“It remains to be seen how much further easing by the European Central Bank can offset continued Riksbank easing, but it will likely be very difficult for the Swedish krona to appreciate significantly against the euro over the next three months given these circumstances”.
Key Quotes
“Falling Swedish inflation expectations, lower oil prices, and lower inflation in the Eurozone indicate that the Riksbank needs to ease further”.
“We believe that, besides strengthening forward guidance, the most likely measure would be launching an asset-purchase program. This might seem counterintuitive in a country where the economy is expected to grow by 2.5% in 2015. However, the fact that Swedish inflation has been close to zero for over two years now highlights the risk that the Riksbank's 2% inflation target will lose its credibility permanently”.
“Riksbank Governor Stefan Ingves said in the minutes that ‘the Riksbank will have to work with quantities’ and will have ‘to make sure that the Riksbank's balance sheet grows,’ since its key policy rate is now already at zero”.
“It remains to be seen how much further easing by the European Central Bank can offset continued Riksbank easing, but it will likely be very difficult for the Swedish krona to appreciate significantly against the euro over the next three months given these circumstances”.