2019.10.2410:06:00UTC+00Sweden Central Bank Set To Hike Rate In December

Sweden's central bank left its negative interest rate unchanged on Thursday and signaled a rate hike in December.

The Executive Board of Riksbank decided to leave the repo rate unchanged at -0.25 percent. The bank said the interest rate will most probably be raised in December to zero percent.

After the December increase, the interest rate will be kept unchanged for a prolonged period, the bank said.

Nonetheless, policymakers observed that economic activity and inflation abroad and in Sweden in the coming years is very uncertain, and it is difficult to say when it will be appropriate to raise the repo rate next time.

Improved prospects would justify a higher interest rate. If the economy were instead to develop less favorably, the board could cut the repo rate or make monetary policy more expansionary in some other way, the bank said.

From today's announcement, probably the biggest takeaway is that it suggests a clear willingness to exit negative rates, James Smith, an ING economist said. The domestic and global economic backdrop has deteriorated significantly over the past few months, which suggests little impetus otherwise to increase interest rates, Smith noted.

The central bank forecast inflation to rise to 1.9 percent in 2020 before slowing back to 1.8 percent in 2021. GDP growth is seen at 1.2 percent next year and 1.6 percent in 2021.

For 2022, the bank projected 2.1 percent inflation and 1.8 percent economic growth.