28 Oct 2015
Riksbank buys more insurance as it extends QE and hold rates - TDS
FXStreet (Delhi) – Research Team at TD Securities, note that the Riksbank left the repo rate on hold at –0.35% as expected while the QE was extended to June 2016, with an additional SEK65bn of government bonds to be bought, bringing the total to SEK200bn.
Key Quotes
“They surprised markets, however, by announcing additional QE, to take the program through to June 2016. Also notable was the “lower for longer” change to their interest rate forecast, which now shows the repo rate at –0.41% through all of 2016, effectively pushing out the first increase in interest rates by six months compared to the July and September Monetary Policy Reports. The interest rate forecast was revised down significantly, indicating “lower for longer” and a possible additional rate cut.”
“With today’s action, we think the Riksbank is done easing for now, but with foreign monetary policy shifting to easing mode, the risks around further Riksbank easing remain to the downside.”
“If the ECB lowers the depo rate by 20bps and alters the current QE program to QE-infinity in December as we expect, then today’s move by the Riksbank is likely defensive enough to prevent major currency appreciation, and they won’t ease further at their December 15th meeting.”
“If, however, the ECB does more than we expect, and/or global growth prospects deteriorate more significantly, then the risks of further policy action by the Riksbank would be significant.”
Key Quotes
“They surprised markets, however, by announcing additional QE, to take the program through to June 2016. Also notable was the “lower for longer” change to their interest rate forecast, which now shows the repo rate at –0.41% through all of 2016, effectively pushing out the first increase in interest rates by six months compared to the July and September Monetary Policy Reports. The interest rate forecast was revised down significantly, indicating “lower for longer” and a possible additional rate cut.”
“With today’s action, we think the Riksbank is done easing for now, but with foreign monetary policy shifting to easing mode, the risks around further Riksbank easing remain to the downside.”
“If the ECB lowers the depo rate by 20bps and alters the current QE program to QE-infinity in December as we expect, then today’s move by the Riksbank is likely defensive enough to prevent major currency appreciation, and they won’t ease further at their December 15th meeting.”
“If, however, the ECB does more than we expect, and/or global growth prospects deteriorate more significantly, then the risks of further policy action by the Riksbank would be significant.”