STOCKHOLM (Reuters) – Sweden’s central bank is set to hold the interest rate steady for the foreseeable future, but rate-setters are ready to act if inflation deviates too much from the target, minutes of the latest policy meeting, published on Wednesday, showed.
The Riksbank held its key interest rate at 2.25% on March 20 amid growing uncertainty about global trade.
“Even though uncertainty over our forecasts has increased, most circumstances continue to suggest a relatively favourable economic development this year and the coming years,” Riksbank Governor Erik Thedeen said in the minutes.
Thedeen said there was a risk the United States will further raise tariffs on imports from the EU and that it could have “a fairly severe” impact on some Swedish companies but a limited one for the wider economy.
The Riksbank held the rate after cutting it six times since spring last year, the last time in January when it said that it had probably done enough to boost a sluggish economy.
Inflation outcomes since then have come in above expectations and the Riksbank said last week it expected consumer price increases to remain above the 2% target level through this year, before falling back.
“Inflation has risen quite considerably since our last monetary policy meeting. There are, however, strong reasons to believe that the increase will not be persistent,” Deputy Governor Per Jansson said.
“Therefore, my view is not that the policy rate, as some are now speculating, will soon need to be raised. It is only if confidence in the inflation target starts to be threatened that I think such expectations are justified.”
Flash inflation figures for March are due on April 4. The Riksbank publishes its next rate decision on May 8.
(Reporting by Johan Ahlander, Niklas Pollard, Terje Solsvik, Anna Ringstrom and Louis Rasmussen; editing by Niklas Pollard)
