Riksbank loosens while Norges Bank stands pat

In the past month, central bank meetings have highlighted contrasts in the responses of policymakers towards inflation. In Sweden, inflation has been on an upward trend recently and is close to the Riksbank’s 2% target. But the Bank still announced an extension of its QE programme in April due to its concerns that a potential appreciation of the krona would pull down imported goods inflation. In contrast, a combination of exchange rate effects and slack in the economy mean that inflation looks set to fall further below the official 2.5% target in Norway. Despite that outlook, the Norges Bank has not responded by loosening policy. Rather, in May it kept policy unchanged and stated that it did not expect any loosening soon. Meanwhile, like the Riksbank, the Swiss National Bank is also concerned about exchange rate effects. It has more justification to be worried, as Swiss core consumer price inflation was barely positive last month. In response, the SNB appears to have been buying foreign currency to stop the franc from appreciating.