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Swedish Krona Climbs as Analysts Don’t Expect Additional Stimulus

December 21, 2016 at 21:07 by Vladimir Vyun

Swedish coins and banknotesThe Swedish krona climbed against the US dollar and the euro after the Sweden’s central bank policy meeting even though the bank kept interest rates negative and extended the asset purchase program by six months.

The Riksbank announced today:

 

The Executive Board of the Riksbank has decided to continue purchasing government bonds during the first six months of 2017, both nominal and real bonds, each corresponding to SEK 15 billion. The repo rate is retained at −0.50 per cent and there is still a greater probability that the rate will be cut than that it will be raised in the near term. Increases in the repo rate are not expected to begin until the beginning of 2018.

Additionally, the central bank demonstrated readiness to cut interest rates further if necessary, predicting a decrease to -0.6% in 2017 and saying:

The Executive Board is still prepared to make monetary policy more expansionary if the upward trend in inflation were to be threatened and confidence in the inflation target weakened.

Analysts do not believe that there will be another interest rate cut or expansion of the quantitative easing program. With sound macroeconomic fundamentals and dissenters on the Board, the Riksbank will have hard time justifying additional stimulus.

USE/SEK dropped 1.45% to 9.2171 as of 20:57 GMT today. EUR/SEK declined 1.07% to 9.6139.

If you have any questions, comments or opinions regarding the Swedish Krona, feel free to post them using the commentary form below.

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