Handelsbanken Capital Markets
Fast Comment Sweden - Riksbank eases monetary policy further

• Riksbank lowers policy rate
• Policy rate on hold until inflation picks up
• Household indebtedness still a concern

Riksbank lowers policy rate
Today, the Riksbank decided to lower its policy rate to 0 percent, 5 basis points more than most analysts had predicted. The decision should be seen against the background of inflation consistently undershooting the official target of 2 percent as confirmed in the latest data for September. The Riksbank is hopeful that today's move will contribute to increasing activity in the economy and anchoring inflation expectation consistent with its official mandated target.

Policy rate on hold until inflation picks up
The Riksbank argues that the policy rate needs to remain at 0 percent until there are visible signs that inflation picks up. The Bank thus expects to hold the policy rate at the present level until mid-2016. Subsequently, the Riksbank expects to start hiking in a gradual fashion with the policy rate likely reaching 1.75 percent towards end-2017. Inflation remains low in 2014 and 2015 and is expected to reach the official target only in 2016.

Household indebtedness still a concern
As before, the Riksbank reiterated today that it is concerned about the high level of household indebtedness. It calls for measures that specifically targets household demand for credits as well as policy initiatives that could address deficiencies in the housing market. However, the primary responsibility for resolving these problems does not rest with monetary policy.

Link to the full report is available HERE