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

--Inflation forecast revised down 'slightly'

--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 'slightly' downgraded its inflation forecast for

2018.

     The full text of the Riksbank announcement follows:

     ===========================================================================

======

     Repo rate unchanged at -0.50 per cent Economic activity in Sweden is strong

and inflation is close to the target of 2 per cent. But the forecast for

inflation in the coming year has been revised down slightly. Monetary policy

needs to remain expansionary for inflation to stabilise close to the target

going forward. The Executive Board of the Riksbank has therefore decided to hold

the repo rate unchanged at -0.50 per cent. The forecast for the repo rate is

unchanged since December and indicates that slow repo rate rises are set to be

initiated during the second half of this year.

     Good economic prospects but somewhat lower inflation in the coming year

Global economic activity is strengthening further and since December market

participants have been expecting slightly less expansionary monetary policy

abroad. Recent falls on equity markets do not change the picture of a good

economic outlook.

     In Sweden, growth is high, the labour market is strong and inflation is

close to the target of 2 per cent. The strong economic activity has contributed

to service prices increasing faster. But in recent months the rate of increase

has declined. In addition, wages have increased at a slower pace than expected.

This indicates that inflationary pressures are lower than was previously

forecast. The inflation forecast has therefore been revised down slightly,

primarily for 2018. From 2019 onwards, inflation is expected to be close to 2

per cent.

     Inflation close to target with an expansionary monetary policy For

inflation to remain close to target going forward, it is important that economic

activity continues to be strong and has an impact on price development, and that

the Swedish krona does not strengthen too quickly. Monetary policy therefore

still needs to be expansionary.

     In light of this, the Executive Board has decided to hold the repo rate

unchanged at -0.50 per cent. The forecast for the repo rate is unchanged since

December and indicates that slow increases are set to be initiated during the

second half of this year. The Riksbank's net purchases of government bonds

amount to just over SEK 310 billion, expressed as a nominal amount. Until

further notice, redemptions and coupon payments will be reinvested in the bond

portfolio.

     Monetary policy needs to proceed cautiously According to the Riksbank's

forecast, the appropriate time is approaching to slowly begin raising the repo

rate. But it is important not to raise the rate too early. Economic activity is

strong and inflation has been close to 2 per cent for some time, but the lower

inflationary pressures create uncertainty over how inflation will develop going

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

has taken a long time to bring inflation and inflation expectations back to 2

per cent, and the uncertainty surrounding the development of inflation means

that monetary policy needs to proceed cautiously. If conditions were to change,

the Executive Board is, as before, prepared to implement further monetary policy

easing.

     Important with measures to reduce the risks linked to household

indebtedness 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, the risks linked to the high household indebtedness need to be managed

via measures within housing policy, taxation policy and, where necessary,

macroprudential policy.

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