STOCKHOLM (dpa-AFX) - Sweden's central bank left its key rate unchanged and signaled that the rate will be first raised in the second half of 2024.
The Executive Board of Riksbank decided to hold the repo rate at zero percent. The bank brought forward the timing of the first rate increase to the second half of 2024.
The Riksbank's asset purchase programme initiated in March 2020 came to an end at the turn of the year. Since then, the holdings have not increased.
To compensate for maturing assets, the board decided that the Riksbank will purchase bonds for SEK 37 billion during the second quarter of this year.
The bank said the asset holdings will remain approximately unchanged in 2022 and then decrease gradually.
Deputy Governors Anna Breman, Martin Flodén and Henry Ohlsson entered reservations against the decision and the forecast for asset purchases. In their view, a tapering of purchases is consistent with continued expansionary financial conditions, strong development of the real economy and inflation in line with the target.
While the Riksbank largely stuck to its dovish message, the fact that three of the six members of the Executive Board entered reservations and favored reducing the size of the balance sheet leaves the direction of policy on a knife edge, David Oxley, an economist at Capital Economics, said.
The trio of hawks will soon be in the ascendency, and that a repo rate hike could still arrive later this year, the economist added.
The bank forecast inflation to rise to 2.9 percent this year, instead of 2.3 percent projected previously. The outlook for 2023 was revised up to 2 percent from 1.9 percent.
Meanwhile, economic growth projection for 2022 was lowered to 3.6 percent from 3.8 percent, and the estimate for next year was retained at 2.0 percent.
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