Swedish c.bank keeps key rate unchanged at zero with no hikes on horizon

Sweden's central bank kept policy unchanged on Tuesday and said it expected the interest rate to remain at zero for the entire forecast period, despite a recent up-tick in inflation. The Riksbank also said it would close the lending facilities that were launched during the pandemic.

Sweden's central bank kept policy unchanged on Tuesday and said it expected the interest rate to remain at zero for the entire forecast period, despite a recent uptick in inflation.

The Riksbank also said it would close the lending facilities that were launched during the pandemic. Analysts in a Reuters poll had forecast no change in rate policy or plans for the balance sheet.

Sweden's economy is back to its pre-pandemic size, faster than much of the rest of Europe and with public restrictions coming to an end, growth is expected to remain strong. With the effects of the pandemic ebbing, central banks around the world are facing tough decisions about when to start weaning economies off emergency support.

"Monetary policy needs to remain expansionary for inflation to be lastingly close to the target going forward," the Swedish central bank said in a statement. Complicating the picture is uncertainty about whether high inflation readings are signs of longer-term price pressure or just the result of temporary bottlenecks and shortages caused by the after-effects of the pandemic.

The Riksbank said inflation was "expected to become temporarily higher than 2 percent in the coming year, before falling back again".

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