January 10, 2018 / 9:47 AM / a year ago

UPDATE 1-Swedish central bank says nearly time for tightening, split on how soon

(Adds further c.bank comment, crown reaction)

STOCKHOLM, Jan 10 (Reuters) - Sweden’s central bank says a shift away from ultra-loose monetary policy is coming, but the board is split over when and how fast it should move, minutes of the latest policy meeting, published on Wednesday, showed.

In December, the Riksbank signalled the beginning of the process of ending three years of negative rates and bond purchases.

“We have come a little closer to the point in time when monetary policy is expected to change direction, but we are not there yet,” Governor Stefan Ingves said in the minutes.

However, there is a growing divide among rate-setters about how quickly policy should be normalized.

While Ingves was supported by Deputy Governor Per Jansson, fellow board member Henry Ohlsson said an improved inflation picture meant that the Riksbank could start to hike the benchmark repo rate early this year.

Deputy Governor Cecilia Skingsley also pointed to more room for the Riksbank to deviate from the relatively dovish policy being pursued by the European Central Bank, whose moves impact on Sweden.

Their calls for a faster normalisation of policy were supported by data on Wednesday which showed the economy in rude health at the end of the year.

Private sector production rose 6.6 percent in November, helping the crown make gains against the euro.

But the majority of policy-makers remain concerned inflation could slip back and are worried about getting ahead of the European Central Bank.

Moving too fast could lead to a stronger crown which would eat into hard-won gains on inflation. Analysts also believe inflation, which hovered around the 2 percent target for most of last year, will dip again in the months ahead.

At its last meeting, the Riksbank held rates steady and said net new bond purchases would end, though some reinvestments would be brought forward, meaning its balance sheet will swell temporarily.

Ohlsson and Deputy Governor Martin Floden voted against bringing forward reinvestments. (Reporting by Stockholm Newsroom; editing by Niklas Pollard/Jeremy Gaunt)

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