Sweden: Riksbank on Hold, Sees Brighter Signs

Posted February 13, 2013 by rvillareal

• Surprising few, the Riksbank kept its key repo rate at 1.00% after its latest Board meeting, this decision came after the 25 bp cut at the last meeting in December. As notable, the Riksbank suggested that rates would remain on hold for the coming year.[private]
• The Riksbank pointed to the unease within financial markets having declined, and households and companies, both in Sweden and abroad, having become slightly more optimistic with regard to the future.
• 2013 GDP growth is still seen at 1.2%, the core inflation outlook remained around the 2% target, especially at the more relevant 2-3 year horizon, thereby ‘justifying’ this latest decision.
• DE View: Unless the economy worsens further, then the Riksbank will remain on hold in the manner it envisages, with it likely that the mild easing bias implied by the Riksbank will disappear in coming months.  Indeed, if signs of a recovery continue (as DE expects), rate-hike speculation may start to emerge by mid-year.

SWE Feb 13[/private]