POLL-Swedish central bank expected to leave policy unchanged amid COVID uncertainty


By Simon Johnson

STOCKHOLM, April 22 (Reuters) - Sweden's central bank is seen keeping policy unchanged when it announces its decision next week, with no change expected until uncertainty regarding the pandemic recedes and recovery is well entrenched, a poll of analysts showed on Friday.

All 17 analysts in the poll saw no change to the repo rate - currently at 0% - with an increase not coming until start of 2023 at the earliest. The Riksbank is also seen completing its 700 billion-crown ($83.12 billion) asset-purchase programme this year as planned.

"The stage is set for a prolonged period of policy stasis," David Oxley at Capital Economics said.

While the pandemic is far from over, economic risks are balanced. The global economy is on the mend. Growth in Sweden, after a slow start, is expected to pick up speed in the second half of the year.

Inflation is close to target and there are even concerns that with fiscal and monetary policy taps wide open, some economies could overheat when the effects of the pandemic recede. Long-dated bond yields globally have risen.

On the other hand, Sweden is still struggling with the third wave of the pandemic with new infections running at high levels.

The vaccination programme has been beset with delays and the government has said it cannot yet ease restrictions. L8N2MF5DA

At its most recent meeting in February, the Riksbank said the economy would need support for years, forecasting no change in the repo rate ahead.

There is little reason for it to change its message this time.

"We expect the European Central Bank to move first and the Riksbank to follow after," Jonas Thulin, head of asset management at private bank Erik Penser, said.

The ECB is also in a holding pattern.

None of the analysts in the poll saw the Riksbank cutting rates over the next couple of years - although it has held the door open to a cut if the pandemic worsens.

The Riksbank is wary of returning to negative rates and has said a cut during the pandemic would not be very effective.

The Riksbank will announce its rate decision on April 27.

($1 = 8.4215 Swedish crowns)

Swedish rates and inflation:http://tmsnrt.rs/1qEN4Rz

(Reporting by Simon Johnson, editing by Larry King)

((simon.c.johnson@thomsonreuters.com; +46 70 721 1045; Reuters Messaging: simon.c.johnson.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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