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Krona dips as Riksbank signals further delay in rate hike

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Krona dips as Riksbank signals further delay in rate hike

The Swedish krona fell against the dollar and the euro after Sweden's central bank kept the repo rate unchanged at negative 0.50%, as expected, but opened the possibility for pushing back a rate hike to February 2019.

Sveriges Riksbank said it could raise the repo rate by 0.25 percentage point in December 2018 or February 2019, a shift from its July meeting, when it expected to start raising interest rates toward the end of 2018. In April, it delayed the expected date for an interest rate hike to the fourth quarter from the third quarter.

The krona plunged against the euro after the central bank released its September monetary policy report, the fourth of six scheduled releases in 2018, and was trading 0.38% lower as of 4:40 a.m. ET on Sept. 6. It was down 0.34% against the dollar around the same time.

"If the economy develops as expected, there will soon be scope to slowly reduce the support from monetary policy," the central bank said, noting that the repo rate will likely be held steady at the next policy meeting in October.

The central bank revised its GDP forecast in 2018 to 2.9% from 2.5% in the July report, and to 2.0% from 1.9% in 2019. It maintained its GDP forecast in 2020 at 2.1%.

The bank also said inflation in terms of the consumer price index with a fixed interest rate, which was at 2.2% in July, is expected to stay close to the target of around 2% a year even when energy price inflation slows down. It revised its 2018 inflation forecast to 2.2% from 2.1%, while maintaining it at 2.1% in 2019 and 1.9% in 2020.