Swedish c.bank in no rush to exit pandemic policy, minutes show

Inflation has picked up, but price pressures are likely to ease again, meaning there is no rush to exit pandemic response measures, the minutes of the most recent policy meeting of Sweden's central bank, published on Thursday, showed.

The Swedish economy has bounced back faster than many other European countries and inflation is expected to top 3% next year, well above the 2% target. "The repo rate needs to remain at zero per cent for a longer period of time, and our holdings of securities need to remain more or less unchanged through next year for inflation to more lastingly develop in line with the inflation target," Governor Stefan Ingves said in the statement.

"It is too early yet to change course." The central bank announced no major changes in policy on Sept 21, though it said it would wind up lending programmes launched during the pandemic.

Pandemic restrictions have mostly ended, raising the questions of when the Riksbank will start to prepare the ground for a shift in the policy message. Several central bankers said that it was possible policy would need to be tightened ahead of the current schedule.

"I could have envisaged a repo-rate path that indicates a rate rise at the end of the forecast period," Deputy Governor Anna Breman said. The Riksbank's current forecast is that it will complete its asset purchase programme at year end and then hold its balance sheet unchanged in 2022.

The benchmark repo rate is expected to remain at 0% until at least the third quarter of 2024.