Wednesday, July 4, 2012

Swedish central bank keeps repo rate unchanged at 1.50%

    The Riksbank, Sweden's central bank, kept its benchmark repo rate unchanged at 1.50 percent to support the country's economy as problems in the euro area cast a shadow.
    But the Swedish economy continues to grow and many of the country's most important trading partners are expected to continue to expand, albeit at a slow pace, the Riksbank said in a statement.
    "There is considerable uncertainty concerning economic developments," the bank said, adding that work on rectifying problems in the euro area is continuing but the economic downturn there is expected to be protracted, subduing Swedish exports.
    "The situation in the euro area is problematic and could worsen, which could have further negative effects on the Swedish economy. In this situation, the repo rate may need to be lower," the bank said.

     "However, it is also possible that confidence in economic developments could return sooner than expected, which could lead to higher demand in the Swedish economy. This would justify a higher repo-rate path."
    The bank said it expected to hold its repo rate at this level for just over a year and when inflationary pressures resume, the repo rate would have to be gradually raised.
    "This repo-rate path will contribute to stabilising inflation around 2 per cent and resource utilisation in the economy around a normal level. Compared with the decision in April, the repo-rate path has been adjusted downwards somewhat as a result of the poorer outlook abroad."
   The bank's new average quarterly forecast showed the repo rate falling to 1.4 percent in the fourth quarter of this year, down from April's forecast of 1.5 percent, and then rising to 1.6 percent in Q3 2013, down from the April forecast of 1.8 percent. It is then forecast to rise to 2.4 percent in Q3 2014, down from a previous forecast 2.6 percent. It's new forecast included an average repo rate of 3.1 percent in the third quarter of 2015.
    Inflation (CPI) is now expected to average 1.1 percent in 2012 and rise to 1.7 percent in 2013 and 2.8 percent in 2014.
    The Riksbank's last rate cut was in February, when it was cut by 25 basis points to the current 1.5 percent.


Post a Comment