Sweden’s central bank is ready to adjust policy measures if economic developments turn out to be worse than expected due to [coronavirus][1] pandemic, according to the minutes of the monetary policy meeting held on April 27.
Governor Stefan Ingves said “We can scale up our measures if developments turn out to be worse than expected.”
“And as the situation stabilises, we may need to develop and clarify the durability of the various action programmes we have launched up to now,” he added.
“In order to be able to act and make the best of a bad situation, it is very important that the Riksbank, in addition to setting the repo rate, is able to fully utilise its balance sheet,” the governor said.
The central bank chief observed that the Swedish [economy][2] is also vulnerable due to the imbalances on the housing market and the high level of household indebtedness.
Trying to increase demand by cutting the repo rate is not justified in the current situation, Deputy Governor Cecilia Skingsley said.
Another Deputy Governor Martin Flodén said “Right now, there are indeed factors that suggest that a policy rate cut would not be an effective way of conducting monetary policy.”
If necessary, the scope of the purchase programme can be increased further, and this applies particularly to purchases of mortgage bond, Flodén added.
At the meeting, the central bank had kept its repo rate unchanged at zero percent and to continue purchases of government and mortgage bonds up until the end of September 2020.
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