By Dominic Chopping
STOCKHOLM--Sweden's central bank on Thursday backed earlier guidance that its key repo rate will remain unchanged at zero at least until late 2023, but said it will expand its asset-purchase program to boost conditions for an economic recovery and help inflation rise towards target.
The Riksbank said the second wave of coronavirus infections has promted tougher restrictions, hurting the already hard-hit services sector and prompting growth forecasts to be revised down in Sweden and abroad. Inflation prospects are also assessed as a little weaker over the coming years, it added.
To provide support to economic developments and help inflation rise toward its 2% target, the Riksbank said it will increase asset purchases by 200 billion Swedish kronor ($23.54 billion) to SEK700 billion, and extend the program to run until Dec. 31, 2021.
"By expanding and extending the asset purchase program, the Riksbank is making it clear that comprehensive monetary policy support will be available as long as it is needed," the Riksbank said.
However, the bank said it still doesn't expect CPIF inflation to lastingly attain 2% until 2023.
"The Riksbank's measures contribute to low interest rates and to the financial markets functioning smoothly and not causing further uncertainty in the already strained situation," it added.
The central bank reiterated that it could still lower the repo rate further if it deemed this an effective measure, particularly if confidence in the inflation target were to be threatened.
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