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Financial News: Riksbank Keeps Rate Unchanged; Doesn't Rule Out Negative

Riksbank Keeps Rate Unchanged; Doesn't Rule Out Negative Rate

04/28/2020 - 04:47:00 (RTTNews)

(RTTNews) - Sweden's central bank kept its repo rate unchanged at zero percent but does not rule out a rate cut later to stimulate demand and support inflation in the recovery phase.

The executive board of Riksbank decided to continue purchases of government and mortgage bonds up until the end of September 2020. The bank will buy securities up to SEK 300 billion this year.

The central bank said it is prepared to continue to use the tools at its disposal.

In order to facilitate credit supply in the economy and counteract a rise in interest rates to households and companies, Riksbank ramped up measures over the last few weeks.

The measures included offering bank loans of up to SEK 500 billion for lending to companies and buying securities for up to SEK 300 billion and offering loans to banks in US dollars.

The central bank cautioned that the economic consequences of the coronavirus pandemic will be considerable.

The Riksbank has chosen to describe possible developments regarding growth and inflation in two scenarios instead of in one detailed forecast.

According to first scenario, inflation will ease to 0.6 percent in 2020 before rising to 1.5 percent in 2021 and 1.6 percent in 2022. At the same time, the economy is forecast to shrink 6.9 percent this year but to expand 4.6 percent in 2021.

In the second set of estimate, the central bank projected 0.6 percent inflation this year, 1.3 percent in 2021 and 1.4 percent in 2022. GDP is expected to contract 9.7 percent in 2020 before rising to 1.7 percent next year and 5.4 percent in 2022.

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