–Leaves Repo Rate Path Unchanged, Sees Rate At 0.9% In 4Q
BRUSSELS (MNI) – Sweden’s central bank raised its key policy rate
25 basis points to 0.75% from 0.5% on Thursday, in line with analysts’
expectations, but left its forward looking rate path unchanged.
The central bank said inflation this year and next would be
slightly lower than it had previously thought and that growth would be
stronger this year but weaker in 2011 and 2012.
“The Swedish economy is continuing to show strong growth,” the
central bank said in a statement on its web site.
“The repo rate needs to be raised gradually towards more normal
levels to attain the inflation target of 2% and create the right
conditions for stable growth in the real economy,” it added.
Leaving the forward looking rate path unchanged from the July
meeting, the Riksbank projected the key repo rate at a level of 0.9% in
4Q this year, before rising to an average 1.9% over 2011 and 3.0% over
2012.
The decision wasn’t unanimous: two of the central bank’s six-strong
board advocated a less hawkish stance.
Long-time dove Deputy Governor Lars Svensson entered a reservation
against the decision to raise the repo rate and against the repo rate
path, preferring a repo rate of 0.5%, the Riksbank statement said.
Deputy Governor Karolina Ekholm also dissented, advocating “a
flatter repo rate path with a repo rate at the end of the forecast
horizon that is around one percentage point lower than the adopted repo
rate path,” the bank said.
“Her main grounds for this were that weaker development abroad can
be expected to reduce growth and inflation in Sweden too in the period
ahead and that a slower increase of the repo rate should therefore bring
inflation closer to the inflation target and resource utilisation closer
to a normal level,” the Riksbank said.
–Brussels bureau: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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