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

--First Riksbank Hike Still Not Seen Until End-2018, Early 2019

     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 again said that it expect to raise rates in either December or

February.

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     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 at the target of 2 per

cent. Since the monetary policy decision in September, developments have for the

most part been as expected and the forecasts remain largely unchanged.

Consequently, in line with the previous forecast, the Executive Board has

decided to hold the repo rate unchanged at -0.50 per cent. If the economy

develops in a way that continues to support the prospects for inflation, the

Executive Board assesses that it will soon be appropriate to start raising the

repo rate at a slow pace. The forecast for the repo rate is the same as in

September and indicates that the repo rate will be raised by 0.25 percentage

points either in December or February.

     Favourable economic activity, Swedish inflation on target

Global economic developments continue to be positive and in line with the

Riksbank's forecasts, even though, for example, developments in Italy and the

escalated trade conflict between the United States and China mean that

uncertainty over the prospects for the global economy has increased. In the wake

of the stronger economic activity, inflationary pressures are expected to

continue rising and monetary policy abroad to move in a less expansionary

direction.

     In Sweden, too, economic developments have been largely as expected and

economic activity has been good for a long period of time. The labour market

situation is expected to remain strong, even if GDP growth slows down going

forward. Inflation increased to 2.5 per cent in September, partly as a result of

rapidly rising energy prices. Different measures of underlying inflation are

lower and inflationary pressures are still assessed to be moderate. However,

there are signs that inflationary pressures are rising and the conditions are

good for inflation to remain close to the target of 2 per cent in the coming

years.

     If inflation prospects hold up, it will soon be appropriate to start

raising the repo rate

The overall picture of the economic outlook and inflation prospects remains

largely unchanged since the September Monetary Policy Report. Consequently, in

line with the previous forecast, the Executive Board has decided to hold the

repo rate unchanged at -0.50 per cent. If the economy develops in a way that

continues to support the prospects for inflation, the Executive Board assesses

that it will soon be appropriate to start raising the repo rate at a slow pace.

The forecast for the repo rate is unchanged since the monetary policy meeting in

September and indicates that the repo rate will be raised by 0.25 percentage

points either in December or February. Reinvestments of principal payments and

coupon payments in the government bond portfolio will continue until further

notice.

     Monetary policy needs to proceed cautiously

The Riksbank continues to exercise vigilance as regards the development of

inflationary pressures in the economy. In this context, it is also important

that the krona exchange rate develops in a manner compatible with inflation

remaining close to target. All in all, the assessment of the Executive Board is

that monetary policy needs to proceed cautiously and be expansionary for a long

period of time to come.

     Measures needed to reduce the risks associated with household indebtedness

The low interest rates are exacerbating the risks linked to high and rising

household indebtedness, while the fundamental causes of the high indebtedness

still remain. It is essential, to ensure that the development of the Swedish

economy is sustainable in the long term, that measures are taken in housing

policy and taxation policy and that macroprudential policy is designed

appropriately.

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