Swedish c.bank keeps policy unchanged, sees rising inflation pressures

Sweden's central bank kept policy unchanged on Thursday and said that the economy still needed support even as the effects of the pandemic fade. "The Executive Board has therefore decided to hold the repo rate unchanged at zero percent and that during the fourth quarter the Riksbank will continue purchasing assets within the envelope of SEK 700 billion," it said in a statement.

Sweden's central bank kept policy unchanged on Thursday and said that the economy still needed support even as the effects of the pandemic fade.

"The Executive Board has therefore decided to hold the repo rate unchanged at zero percent and that during the fourth quarter the Riksbank will continue purchasing assets within the envelope of SEK 700 billion," it said in a statement. Analysts in a Reuters poll had forecast no change in policy.

The pandemic has affected Sweden's economy less than many others in Europe, in part due to the country's reliance on mostly voluntary social distancing measures that have allowed many businesses to keep operating. The government has now started easing many restrictions and recovery has been faster than expected. The Riksbank sees the economy growing 4.2% this year, inflation is above the 2% target and house prices have soared.

Nevertheless, the bank believes the economy will need support from fiscal and monetary policy for some time to come. It said inflation pressures were "moderate," but expected to rise in the coming years.

"The Executive Board may cut the repo rate or in some other way make monetary policy more expansionary if inflation prospects weaken," the central bank said. "A less expansionary monetary policy may be justified if inflation were to risk overshooting the target significantly and persistently."