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Sweden should start planning for how to deal with the end of its quantitative easing programme, one of the Riksbank’s deputy governors has said, in a notable shift of tone from the central bank’s recent dovishness in official statements.

Speaking at the Swedish Trade Union Confederation on Friday morning, Henry Ohlsson said:

It is… probable that the Riksbank sooner or later will first ease up on the accelerator and then begin using the brake. In my opinion, it is wise to start thinking now about how such a scenario will play out.

Sweden’s economy has been humming along healthily in recent months, an achievement the central bank has put down in part to the success of its policies of record low negative interest rates and bond-buying programme. Despite that, however, it has insisted that further rate cuts are more likely than a rise.

While few analysts are expecting it to cut the repo rate below its current level of -0.5 per cent, the central bank’s dovishness has led many to push back their estimates of when a rise will finally come.

Mr Ohlsson once again defended the Riksbank’s stimulus in his speech, arguing that “without the expansionary monetary policy, growth and employment would have been lower and unemployment would have been higher. This would hardly have benefited any group in society”.

However, he added that “utilisation in the Swedish economy has now passed normal levels and can be expected to rise even higher in the coming years”, and said “we see ahead of us that inflation will rise towards the target”.

Copyright The Financial Times Limited 2017. All rights reserved.
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