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Sweden Central Bank Expands Quantitative Easing

riksbank 021517 26nov20 lt

Sweden's central bank expanded its asset purchase programme and vowed to keep its interest rate at zero in coming years as tighter restrictions to contain the spread of Covid-19 infections lead to a new downturn in the economy.

The Executive Board of Riksbank decided to expand the asset purchases by SEK 200 billion to a total nominal amount of up to SEK 700 billion. The programme will run until December 2021.

The programme will also include treasury bills, to ensure the impact on rate-setting is as broad as possible.

Deputy Governors Anna Breman and Martin Flodén entered reservations against the decision to expand the Riksbank's asset purchase programme by SEK 200 billion and to include treasury bills in the programme.

The repo rate was held unchanged at zero percent and is expected to remain at this level in the coming years, the bank said.

The bank expressed its willingness to cut rates further, if this is assessed to be an effective measure, particularly if confidence in the inflation target were to be threatened. The bank said the comprehensive monetary policy support will be available as long as it is needed.

The bank forecast the economy to shrink 4 percent this year versus prior projection of -3.6 percent. The growth outlook for next year was lowered to 2.6 percent from 3.7 percent but that for 2022 was raised to 5 percent from 3.7 percent.

According to Riksbank, CPIF inflation is not likely to lastingly attain 2 percent until 2023. Consumer price inflation is forecast to slow to 0.4 percent in 2020 before rising marginally to 0.8 percent in 2021 and to 1.2 percent in 2022.

In September, the bank had projected consumer prices to rise 0.6 percent in 2020, 1.1 percent in 2021 and 1.3 percent in 2022.

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