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By David Robinson
LONDON (MNI) - The Riksbank left its repo rate unchanged at following the
April policy meeting but lowered its rate projection, with the central bank
saying it assesses that the first hike come "towards the end of this year."
Its detailed forecasts, however, suggested that the move could even be
delayed until early 2019.
The February rate path showed the first hike in the repo rate, which
currently stands at -0.5%, coming in September but the new path shows that an
Autumn hike is no longer anticipated by policymakers.
The numerical repo rate forecast showed it rising to -0.43% in November
this year and on up to -0.27% in February 2019. Assuming the central bank moves
in 25 basis point steps that leaves the hike pretty much priced in for the first
quarter of 2019.
--GENTLE UPWARD PATH
The repo rate's projected climb in the Riksbank guidance is gentle. The
repo rate was shown turning positive to stand at 0.42% in Q2 2020 and the moving
on up to 1.01% by May 2021.
With policy universally expected to be left on hold, the spotlight at this
meeting was always on the Riksbank's in-house rate profile.
The Riksbank has been at the vanguard of central bank's publishing their
own rate forecasts, and although they publish a disclaimer stressing it is not a
promise on future action, it is at the centre of the market attention.
Soft inflation was cited as one factor behind the decision to push back the
likely timing of the first rate hike.
"It has taken a long time to bring up inflation and inflation expectations,
and there is considerable uncertainty over the development of inflation.
Monetary policy thus needs to proceed cautiously," the Riksbank policy summary
The headline CPIF inflation measure forecasts was nudged up to average 1.9%
in 2018 compared to 1.8% in February and was left unchanged at 1.9% in 2019.
The policy vote split was the same as at previous meeting, with Deputy
Governor Henry Ohlsson breaking ranks to vote for a 25 basis point rate hike.
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