Swedish central bank ready to soften economic blow of second COVID wave

STOCKHOLM: Sweden's central bank will keep monetary policy expansionary for as long as necessary to fight the economic effects of the pandemic, the minutes of the November policy meeting, published on Monday, showed.

Businesses bounced back from a record fall in growth in the second quarter but infection rates have been rising fast once again in recent weeks, prompting stricter containment measures, though Sweden has, as during the spring, not opted for the kind of lockdown adopted by many European nations.

"Our measures will remain in place as long as they are needed and there is no reason to pull out too quickly," Riksbank Governor Stefan Ingves said in the text of the minutes.

The Riksbank has said it expects the economy to stall and maybe even shrink again in the next six months.

It has left the benchmark repo rate at zero percent since late 2019 - unchanged throughout the pandemic - arguing a cut would have limited effect.

However, the minutes of its Nov. 26 policy meeting showed several members had raised the possibility of lowering the repo rate into negative territory once again if prospects for inflation were to deteriorate further.

"I would like to emphasise that a repo-rate cut is for me absolutely not a measure that cannot become relevant going forward," Deputy Governor Per Jansson said.

"If there is a need to make monetary policy significantly more expansionary, it is on the contrary the measure I believe in the most."

At its latest monetary policy meeting, the central bank said it would extend its asset-purchase programme to the end of next year and add another 200 billion Swedish crowns ($23.7 billion) to its size to support the economy.