MNI POLICY: Riksbank See Clearer Downside Global Risk: Minutes

--Riksbank Jansson Not Eyeing Hike Reverse: Minutes

By David Robinson

     LONDON (MNI) - The Riksbank published the minutes of the Executive Board's

Feb 12 monetary policy meeting on Friday.

     At that meeting, the board voted to leave its key policy rate on hold at

-0.25% and opted to take away the power of the Governor and First Deputy

Governor to sanction intervention in foreign exchange markets without consulting

with the board.

     The following are further key points from the minutes:

     --Deputy Governor Per Jansson, who had opposed the December decision to

hike the repo rate to -0.25%, could not attend the February meeting. His views

on the February decision were published alongside the minutes and he revealed

that he would have supported the no change to the repo rate decision.

     "Cutting the repo rate once again to -0.5 per cent was of course not a

realistic alternative at the February meeting. And the negative consequences of

raising the repo rate from -0.5 per cent to -0.25 per cent should not be

exaggerated," he said, making clear he is very unlikely to be a dissenter on

policy in coming months. 

     He once again expressed concerns about below target inflation once the

boost from energy prices fades.

     --Board members repeatedly cited evidence of weaker economic developments

in Sweden's main export markets and argued for a cautious approach to policy

setting. "The downside risks are ... becoming clearer," Deputy Governor Deputy

Governor Martin Floden said.

     Floden said that even domestically there were signs of weakness, with

consumer confidence falling and household consumption being surprisingly soft.

His colleagues on the board echoed some of these concerns.

     -The board's collective policy path shows a rate hike is most likely in the

second half of 2019. Deputy Governor Cecilia Skingsley said that if inflation on

the target CPIH measure was below the 2.0% target in the second half of the year

it would still be possible to hike.  She added that any hike would be determined

by the inflation outlook and "it is not an end in itself to move away from

negative interest rates."

     --Governor Stefan Ingves talked about the likelihood of a gradual

tightening of policy but highlighted the uncertainty around the central bank's

forecasts, suggesting he is fairly agnostic in his policy views. The Riksbank

failed to predict the decline in the krona which is  one key element in the

inflation outlook and it is once again predicting appreciation.

     "The difficulties inherent in exchange rate forecasts are well captured by

recent developments when we, as we almost always do, forecast an exchange rate

appreciation at the same time as developments are going in the opposite

direction," he said.

     --The board also stressed that the kind of risks arising from  the US and

China trade dispute and from Brexit could not be captured in any straightforward

way in the bank's collective forecasts. Such downside risks do not directly

influence the central projection and members highlighted their awareness of

these risks.

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