Another European central bank expands QE after ECB remarks
The Swedish krona and 10-year government bond yields hit two-month lows on Wednesday after Sweden's central bank expanded its asset purchase program and signaled it would intervene in the currency market if there is a threat to inflation.
The Riksbank held its benchmark repo rate unchanged at -0.35 percent, as expected, and said it would expand its bond buying program by 65 billion Swedish kronas ($7.65 billion) to a total of 200 billion kronas. The central bank has trimmed rates three times this year to boost prices, most recently in July when the central bank also fired up its bond buying program, to 135 billion Swedish kronas.
The local currency fell to 9.4360 per euro, down 0.4 percent on the day, before recovering to 9.3483.
The dollar rose to around 8.5434 crowns, before sliding to 8.4455.
Swedish 10-year bond yields fell to a two-month low of 0.51 percent, down 13 basis points on the day, from 0.59 percent before the decision.
Swedish blue-chip stocks rose
after the decision, before steadying to trade up 0.6 percent.
A great majority of analysts polled by Reuters had forecast the central bank would keep its record low repo rate
unchanged after consumer prices rose in September for the first time in
four months. However, analysts at Nordea Bank, Scandinavia's largest lender, predict the Swedish central bank will start limiting its easing measures after today's QE expansion. Tightening would lead the krona to surge as much as 12 percent against the euro by March, says SEB.
Last Thursday, European Central Bank chief Mario Draghi spoke of a negative deposit rate and signaled its 1 trillion euro quantitative easing program may be expanded when it meets again in December.
The next day, the Chinese central bank
had slashed its main benchmark rate for the sixth time since last November.
By Sunday, both Mark Carney, the Bank of England head, and Vice
Chairman Fritz Zurbruegg, from the Swiss National Bank, were both releasing dovish messages in their country's national media.
Meanwhile on Tuesday, the ECB's Executive Board member Benoit Coeure spoke about more easing by the central bank during a trip to Mexico. He said the tools that the ECB could use would depend on the shocks it sees to liquidity or interest rates.
