25.11.202109:20:00UTC+00Sweden Central Bank Signals Rate Hike In 2024

Sweden's central bank left its key interest rate unchanged, as widely expected on Thursday, and signaled a rate hike in 2024.

At the monetary policy meeting, the Executive Board of Riksbank decided to hold the repo rate at zero percent. The bank forecast a rate hike in the latter part of 2024.

The board also decided to purchase bonds during the first quarter of 2022 to compensate for forthcoming principal payments in the Riksbank's asset holdings.

The bank forecast the holdings to remain roughly unchanged in 2022, after which they will gradually decrease.

But the message that the balance sheet will "decrease gradually" thereafter suggests that the Bank is eyeing "QT" in 2023, David Oxley, an economist at Capital Economics, said.

"On balance, we think the risks are that it shrinks the balance sheet faster than it has in mind," the economist added.

Riksbank has upgraded its inflation forecasts for this year, 2022 and 2023. Inflation was 3.1 percent in October 2021. The central bank forecasts it to fall next year.

Inflation is seen at 2.1 percent in 2021 instead of 2 percent estimated earlier. Likewise, the outlook for 2022 was lifted to 2.3 percent from 2.1 percent.

The bank forecast inflation to slow to 1.9 percent in 2023 versus prior forecast of 1.8 percent. According to the latest estimate, the economy will grow 4.7 percent this year, unchanged from the previous outlook. The projection for next year was lifted to 3.8 percent from 3.6 percent.

In 2024, economic growth is seen at 1.5 percent and inflation at 2.2 percent.