**MNI POLICY: Riksbank Minutes: Jansson Bemoans Year End Hike

--Deputy Governor Floden Sees Strong Case Against Cut

--Jansson Criticizes Case For Hike Late 2019 0r Early 2020 

By David Robinson

     **LONDON (MNI) - Although the Riksbank voted unanimously to keep the policy

rate unchanged at -0.25%, there were dissenting views on the policy outlook, the

minutes of the September 4 meeting show, with Deputy Governor Per Jansson making

it clear that he was uncomfortable with the board's guidance that the repo rate

was likely to be raised towards the end of 2019 or early in 2020.

     The following are key points from the minutes:

     -Jansson said that he supported the decision to flatten the collective rate

path, but that he had difficulties with the majority view that a near term 25

basis point hike should be left in place.

     "I see the proposal in the draft report to lower the repo rate path quite

substantially as the right thing to do .. But in the short term .. the starting

point is still that another rate rise could be implemented, towards the end of

the year or at the beginning of next year. I have significantly more difficulty

with this assumption," he said.

     He pointed out that near term inflation was expected to remain quite

clearly below the 2.0% target and said that the board could have shown a

forecast without a rate hike around the turn of the year with slightly more

tightening priced-in further out if the economic forecasts held good. He said

that he did not issue a formal reservation because "the increase of the repo

rate has not yet been decided" but his comments make clear he is very likely to

vote against any near-term tightening.

     -Markets have priced in the possibility of easing but Deputy Governor

Martin Floden was notably forceful in arguing against easing, and the majority

are not currently contemplating it. He asked rhetorically if they should be

planning for a cut but said "When the policy rate is already -0.25 per cent, the

impact on lending rates would probably be limited. The dominant effect would

instead be a weakening of the exchange rate. However, the krona is already weak.

A further depreciation of the krona would lead to unnecessary volatility and

uncertainty over the development of the exchange rate and, ultimately, the

entire Swedish economy."

     -Deputy Governor Cecilia Skingsley set out the case for the board's central

view, of leaving a near-term hike in place and projecting glacial tightening

after that. She highlighted the contradictory picture of a Swedish economy

without spare capacity and relatively stable inflation facing intensified

downside risks from abroad.

     "With inflation close to target, well-anchored inflation expectations and

resource utilisation above its normal level, it seems reasonable to continue

with gradual rate rises in Sweden, in line with the previous forecast. However,

considering the economic outlook and risk outlook, the forecast of future rate

rises needs to be adjusted," she said.

     -Deputy Governor Henry Ohlsson, previously a hawkish dissenter, said that

"This time, I can support the economic picture and the forecasts in the draft

Monetary Policy Report."

     -Governor Stefan Ingves also supported the central view and said that while

the policy stance of the major central banks placed constraints on the Riksbank,

it had more freedom now than it has had in the past and did not have to mimic

the easing of the Federal Reserve and the European Central Bank.

     When the ECB set more expansionary monetary policy in 2014 and 2015, Sweden

was also struggling with low inflation and low inflation expectations but "We

are in a better place now, and therefore it is reasonable to assume that the

degrees of freedom are greater," he said.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: MT$$$$,MX$$$$]