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STOCKHOLM, Sept 4 (Reuters) - Sweden’s central bank kept its key interest rate unchanged at 0.25 percent as expected on Thursday and stuck with its previous forecast that it would start to tighten policy at the end of next year.
All analysts polled by Reuters had said the bank would keep the repo rate unchanged. The majority also expected no change in the rate path, although some had said there was a chance the Riksbank would push back the timing of its first rate hike.
“The repo rate needs to remain low for a long period of time for inflation to rise towards the target,” the Riksbank said in a statement. “As in the previous forecast, it is assessed to be appropriate to begin raising the repo rate towards the end of 2015, when inflation is clearly higher.”
The central bank, however, said that a weaker euro zone had led it to lower its rate path from the middle of 2016.
Sweden’s economy stalled in the first half of the year - dragged down mainly by slack demand from Europe. Most analysts expect that after a larger than expected 50 basis point rate cut in July, the policy easing cycle has now ended.
Growth is expected to pick up in the latter half of the year and the central bank sees the economy expanding 1.7 pct for the full year and 3.0 percent in 2015, lower than its previous forecasts, but still easily outpacing most of Europe.
Inflation since the July cut has come in slightly above the Riksbank’s forecasts, though it remains well below the central bank’s 2 percent target. Consumer prices fell 0.3 percent in July and were flat compared to the same month the previous year.
The ECB, also struggling to cope with persistently low inflation, announces its monetary policy decision later in the day.
Reporting by Stockholm Newsroom; Editing by Alistair Scrutton