The Riksbank maintains the key interest rate at 4.00 percent – the highest level since autumn 2008. It has now remained there since September last year – this after eight consecutive increases from the zero interest rate just over a year earlier.
– We are going in the right direction, but we are not there yet, says Sweden’s Riksbank Governor Erik Thedéen.
Clear lowering signal
An unchanged policy rate was something that basically all assessors in the market had expected. But there was a novelty in it The Riksbank’s message:
“If the outlook for inflation continues to be favorable, it is not out of the question that the policy rate could be lowered during the first half of this year,” writes the bank.
– We see a lower risk of inflation taking hold, he says at a press conference.
The message is unexpectedly clear and “dove-eyed” in terms of monetary policy. Earlier, it was communicated that the interest rate could remain at a high four percent for the rest of the year.
– It is a softening from the Riksbank, which has switched from not thinking about interest rate cuts to communicating that, but not ruling out that it could be the first half of this year, says SVT’s economic commentator Alexander Norén.
“Adjusting”
– The Riksbank executive now sounds very different compared to November. Reality had escaped them, but now they have caught up and are adjusting to the market’s expectations of them, says Alexander Norén.
The Riksbank Executive’s job is to create stability by being predictable – and despite declining inflation, they have wanted to send signals that there is a risk of a setback and that they are not yet ready to let off the brakes.
The rate of inflation, according to the CPIF measure used by the Riksbank, fell to 2.3 percent in December. The target is 2 percent, so there is some way to go. At the same time, the recession risks worsening if you remain at a high interest rate for too long, as it slows down the economy.
