Krona Gains as Riksbank Signals About Gradual Reduction of Stimulus

The Swedish krona rose today after the nation’s central bank kept its monetary policy unchanged but signaled that it is going to start gradually reduce stimulus in the future.

The Riksbank left its main interest rate at -0.5% at today’s meeting but stated that it “is expecting, as before, to begin slowly raising the repo rate in the middle of 2018.” The bank explained, though, that it does not mean an abrupt end to the era of extremely accommodative monetary policy:

The relatively subdued inflationary pressures mean, however, that monetary policy abroad will remain expansionary in the years ahead.

The Riksbank explained that stimulus is still required to keep inflation near the bank’s target:

It has required a great deal of support from monetary policy to bring up inflation and inflation expectations.

The bank’s statement also mentioned the exchange rate:

It is also important that the krona does not appreciate too quickly.

USD/SEK fell 0.6% to 8.3575 as of 11:26 GMT today.

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