Riksbank’s Jansson: Will support a rate cut if inflation expectations fall sharply

“If inflation expectations fall sharply, I would not hesitate to support a rate cut,” noted Swedish central bank, Riksbank, Deputy Governor Per Jansson said on Wednesday. 

Further comments

“That extensive Risksbank measures during pandemic have not been fully used should not be seen as a failure.”

“Well advised to prepare for positive and negative inflation surprises.”

“Wouldn't worry me too much if inflation overshot for a while. “

“More likely inflation will surprise on the downside.”

“Important that long-run inflation expectations do not deviate too much from the inflation target  

“If negative deposit rates at banks are the price of preventing inflation expectations from de-anchoring then so be it.”

“But there are limits to the policy rate given that we are at zero at the moment.”

Market reaction

Despite the dovish comments, the Swedish Krona (SEK) jumped to fresh two-day highs against the euro, with EUR/SEK downed to 10.2911.

The spot was last seen trading 0.33% lower at 10.2998.