February 19, 2021
- The minutes of the latest Riksbank Monetary Policy Meeting showed strong support for unchanged policy settings.
- Despite Sweden’s better than expected economic performance since the November meeting, there was a dovish tone to the debate, with several members showing a willingness to cut the repo rate if needed.
- Even in a scenario where the economy recovered more quickly than expected, it was felt that an inflation overshoot could help to anchor expectations more firmly around the target.
February 10, 2021
- The Riksbank has announced no monetary policy changes, as expected. However, a relatively hawkish tone is created by GDP growth upgrades. We see downside risk to the more resilient global picture, which relies on a vaccination dividend.
- Any sense that the vaccination rollout is delayed or offers limited protection to new and more virulent strains of Covid19 will return us to a scenario where the need for monetary policy stimuli increases.
February 04, 2021
- The BoE MPC voted unanimously in favour of no policy changes. Gilt purchases will continue at the same pace with a bias to slow later. Bank rate remains at 0.1%. Banks are instructed to prepare systems for a temporary negative rate environment.
- Disagreement centred on whether instructing banks to rectify the operational hurdles to negative rates could occur without markets misconstruing it as an intent to deliver a cut. The tool will not be ready for at least six-months and remains unlikely even later.
- A cut would need to be operationally possible, with stimulus needed and no better way of delivering it. Disappointment in the recovery seems likely relative to the BoE’s bullish view of effectively no permanent damage, but supply destruction isn’t dovish.