2021.02.1009:10:00UTC+00Sweden Central Bank Keeps Rate, QE Unchanged

Sweden's central bank maintained its key interest rate and the asset purchase programme, in order to facilitate the recovery and bring inflation back to the target.

The Executive Board of Riksbank decided to hold the repo rate at zero percent. The rate is projected to remain at this level in the years to come.

The board also kept the envelope of the asset purchase programme unchanged at SEK 700 billion.

The executive board estimated that the envelope for asset purchases will be fully utilized by the end of 2021 and that the size of the holdings will be maintained on this level at least during 2022.

The bank vowed to formulate the monetary policy so that it supports the recovery and inflation as long as necessary.

A further extension to the quantitative easing programme is possible later in the year, particularly if the downside risks surrounding the virus materialise - though a return to negative rates remains unlikely, James Smith and Petr Krpata, economists at ING said.

The bank upgraded its inflation forecast for both 2021 and 2022 to 1.3 percent, from 0.8 percent and 1.2 percent, respectively.

Riksbank observed that the economic developments in 2021 will be largely determined by how quickly and effectively vaccinations reduce the pandemic.

The growth outlook for 2021 was raised to 3 percent from 2.6 percent but that for 2022 was lowered to 3.9 percent from 5 percent.