Riksbank minutes strike dovish tone

The minutes of the Riksbank’s February meeting were fairly dovish. With board members concerned about the krona’s appreciation and political risks in the euro-zone, we think that the Bank will wait until July before dropping talk of the repo rate being cut further. Two weeks ago the Riksbank left its repo rate unchanged at -0.5% and confirmed that the QE programme would continue until the end of June. In its statement the Bank noted that there was a greater chance that the next change in monetary policy would be a rate cut rather than a rate rise.  The board members were concerned by the rise of the krona, which had appreciated by 3% since the Bank’s previous meeting in December and was thus higher than its expectations. Even the more hawkish Mr Flodén agreed with this concern, noting that “a continued appreciation at the same rate would hardly be desirable”. Most notably with regard to exchange rate effects, Governor Stefan Ingves stated that he considers it “a risky strategy for a central bank in a small, open economy such as Sweden’s to more tangibly start to normalise monetary policy ahead of the central bank of a large currency area like the ECB.”