Next Riksbank move will be to tighten monetary policy

Today’s minutes confirmed that only half of the Riksbank’s Executive Board supported the extension of its QE programme. And with inflation surpassing expectations in December, there is little cause for further monetary policy loosening – we expect the repo rate to be raised at the end of this year. To recap, last month the Riksbank left its repo rate unchanged at -0.5% but extended its QE programme by six months. It will make an additional SEK30bn of bond purchases over the first half of 2017, split evenly between nominal and inflation-linked bonds. The total size of the programme will reach SEK275bn, or 45% of Sweden’s total government debt.