MNI: Sweden Riksbank Leaves Key Repo Rate At -0.50% - Text

--Brings Forward Reinvestment of Maturing Bonds To Jan 2018

--First Riksbank Hike Still Not Seen Until Mid-2018

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

unchanged at -0.5% at Monday's meeting, with bond buying plans left unchanged.

The central bank repeated that it doesn't expect raise rises until the middle of

2018. However, the Board has decided to bring forward the plans to reinvest

maturing bonds.

     The full text of the Riksbank announcement follows:

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     Repo rate unchanged at -0.50 per cent, reinvestment of redemptions brought

forward

The strong economic activity has contributed to inflation being close to 2 per

cent for a period of time. Monetary policy needs to remain expansionary for

inflation to continue to be close to the target. The Executive Board of the

Riksbank has therefore decided to hold the repo rate unchanged at -0.50 per cent

and is expecting, as before, to begin slowly raising the repo rate in the middle

of 2018. The Executive Board has also decided to begin reinvesting in January

2018 the bonds that mature in 2019. 

     International economic activity is strengthening further. The relatively

subdued inflationary pressures mean, however, that monetary policy abroad will

remain expansionary in the years ahead. 

     The economic prospects and outlook for inflation in Sweden are largely

unchanged from October. Economic activity is strong and the employment rate is

high. Although the decline in housing prices is expected to dampen housing

investment in the coming years, the effects on GDP growth will be partly

counteracted by the stronger demand from abroad.

     Continued expansionary monetary policy to keep inflation close to the

target

Although inflation has now been close to 2 per cent for some time, prior to this

it was below the target for a long time. It has required a great deal of support

from monetary policy to bring up inflation and inflation expectations. Economic

activity needs to remain strong for inflation to continue to be close to the

target. It is also important that the krona does not appreciate too quickly.

     The Executive Board of the Riksbank has therefore decided to hold the repo

rate unchanged at -0.50 per cent and is expecting, as before, to begin slowly

raising the repo rate in the middle of 2018. The Riksbank's net purchases of

government bonds will amount to a nominal value of SEK 290 billion at the end of

2017. Redemptions and coupon payments in the government bond portfolio will be

reinvested until further notice. Large redemptions, amounting to around SEK 50

billion, will occur during the first half of 2019. In addition, there are coupon

payments totalling around SEK 15 billion from January 2018 to June 2019. To

retain the Riksbank's presence on the market and attain a relatively even rate

of purchase going forward, the reinvestments of these redemptions and coupon

payments will begin as early as January 2018 and continue until the middle of

2019. This means that the Riksbank's holdings of government bonds will increase

temporarily in 2018 and the beginning of 2019.

     Just as before, the Riksbank is prepared to implement further monetary

policy easing if necessary to stabilise inflation and safeguard the inflation

target. All of the tools that the Riksbank has described earlier can be used if

necessary.

     Monetary policy safeguards the inflation target's role as nominal anchor

for price and wage formation and thereby contributes to the positive development

of the economy. But the low interest rates at the same time contribute to

increasing the risks linked to high and rising household indebtedness. To

achieve long-term sustainable development in the Swedish economy, these risks

need to be managed via measures within housing policy, taxation policy and, if

necessary, macroprudential policy.

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