MNI: Sweden Riksbank Leaves Key Repo Rate At -0.25% - Text

     LONDON (MNI) - Sweden's Riksbank has decided to leave the key repo rate

unchanged at -0.25% at its latest meeting.

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     The full text of the Riksbank announcement follows:

     Repo rate unchanged at -0.25 per cent

Economic activity in Sweden remains strong and inflation is close to the target

of 2 per cent. Uncertainty abroad has increased but new information since the

monetary policy decision in April has not led to any major revisions of the

forecasts overall. With continued support from monetary policy, the conditions

for inflation to remain close to the target in the period ahead are considered

good. The Executive Board has decided to hold the repo rate unchanged at -0.25

per cent. The forecast for the repo rate is also unchanged and indicates that it

will be increased again towards the end of the year or at the beginning of next

year. However, the risks surrounding developments abroad can have a bearing on

the prospects for Sweden, which emphasises the importance of proceeding

cautiously with monetary policy.

     Good economic activity but increased uncertainty abroad Developments both

in Sweden and abroad are largely in line with the Riksbank's forecasts. However,

increasing unease over further deterioration in trade relations and a faster

decline in global economic activity have clearly affected pricing on the

financial markets, where interest rates on the whole have fallen. But growth

abroad is relatively good and confidence among both households and companies

indicates normal growth in the coming period. With the information now

available, the Riksbank assesses that there is no reason to make any major

adjustments to the forecasts for international inflation and growth.

     Activity in the Swedish economy has remained high since the monetary policy

meeting in April. Resource utilisation is expected to be high even though

developments on the labour market will enter a calmer phase in the years ahead.

Inflation has been close to 2 per cent since the beginning of 2017. In line with

the Riksbank's forecast, CPIF inflation amounted to 2.1 per cent in May.

     The economic outlook and inflation prospects remain good. Overall, the new

information since the monetary policy meeting in April has not changed the

assessment of the conditions for inflation to remain close to 2 per cent. The

Executive Board has therefore decided to leave the repo rate unchanged at -0.25

per cent. The forecast for the repo rate is also unchanged and indicates that it

will be increased again towards the end of the year or at the beginning of next

year. This means that inflation will receive continued support from monetary

policy to remain close to 2 per cent. In accordance with the decision in April,

the Riksbank will purchase government bonds for a nominal amount of SEK 45

billion, with effect from July 2019 to December 2020.

     Monetary policy needs to proceed cautiously However, the risks concerning

international developments may have a bearing on the economic outlook and

inflation prospects for Sweden as well. The downturn in international bond

yields can indicate that global interest rates going forward will be low for a

longer period to come. This underlines the importance of proceeding cautiously

with monetary policy. If the conditions for inflation change were to change,

monetary policy will be adjusted.

     Important to have measures to reduce risks associated with household

indebtedness

     Swedish households are highly indebted and therefore sensitive to changes

in economic conditions, such as rising interest rates or higher unemployment. In

order to reduce the risks linked to household indebtedness and address the

structural problems on the Swedish housing market, measures within housing and

tax policy and appropriate macroprudential policy are required.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com