The Swedish Riksbank kept the benchmark interest rate unchanged at -0.35% during its decision yesterday, deciding instead to expand its quantitative easing program by SEK65 billion through June of 2016. The markets were expecting to see the asset purchase program being extended but widely underestimated the size. While the repo rates were left untouched, it is anticipated that there could further rate cuts bringing rates towards -0.40% in 2016. The Swedish Central bank also struck a dovish tone by revising its forecasts lower in light of the risks to the outlook. EURSEK declined -0.57% for the session to close at 9.338, posting an 8-day low. The dovish tone came as a surprise considering that macroeconomic conditions in Sweden were so far posting strong fundamental growth. However, the asset purchase expansion was seen as a move to frontrun speculation of the ECB's own asset purchase expansion in December.
FOMC Surprises With Hawkish Narrative
Daily Analysis - 29/10/2015