TEXT: Sweden Riksbank Leaves Key Repo Rate At -0.50%

--Bond Purchases To Continue As Planned

--First Riksbank Hike 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 full text of the Riksbank announcement follows:

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     Repo rate unchanged at -0.50 per cent -- bond purchases according to plan

     Date 07/09/2017 

     Economic activity is strong and inflation is close to the target of 2 per

cent. Monetary policy needs to remain expansionary for inflation to continue to

be close to 2 per cent. 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, not to raise it until the middle of 2018. The purchases of government

bonds will continue during the second half of 2017, as decided by the Executive

Board in April. 

     The economic signals from abroad are good, but global inflation remains

subdued. Compared with the forecast in July, there are now expectations of a

somewhat more expansionary monetary policy in many countries that are important

to Sweden.

     Economic activity in Sweden is strong; GDP grew rapidly in the second

quarter and the employment rate is at a historically high level. Inflation has

continued to rise and in recent months been higher than expected. The outcomes

are partly explained by temporary factors, but even disregarding this, inflation

has been stronger than expected.

     However, it has taken time and a great deal of support from monetary policy

to bring up inflation and inflation expectations. Although there has been a

broader increase in prices for services recently, economic activity needs to

continue to make an impact on price development. This is underlined by, for

instance, weak growth in cost pressures so far this year. It is also important

for the development of inflation that the krona exchange rate does not

appreciate too quickly. This could happen if, for example, the Riksbank's

monetary policy deviates too far from that of other countries.

     Continued expansionary monetary policy for inflation close to the target

     Given this, the Executive Board of the Riksbank has decided to hold the

repo rate unchanged at -0.50 per cent and does not expect to raise it until the

middle of 2018. Purchases of government bonds will continue during the second

half of 2017, as decided in April. At the end of the year, the purchases of

government bonds will thus amount to a total of SEK 290 billion, excluding

reinvestments. Maturities and coupon payments will be reinvested until further

notice. CPIF inflation is expected to be close to 2 per cent in the coming

years, with continued support from monetary policy.

     Just as before, the Executive Board 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,

as always, be used if necessary.

     Monetary policy needs to be expansionary to safeguard the role of the

inflation target as nominal anchor for price-setting and wage formation. 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 targeted

measures within housing policy, taxation policy and macroprudential policy.

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