February 9, 2018 / 1:39 PM / 11 days ago

Swedish central bank seen leaving policy unchanged next week

STOCKHOLM (Reuters) - Sweden’s central bank is likely to leave policy unchanged next week, a poll of analysts by Reuters showed, but the prospect of weaker inflation could lead it to push back its forecast for future policy tightening beyond the middle of the year.

All 14 analysts in the poll saw the Riksbank leaving the repo rate, currently at -0.50 percent, unchanged next week.

The majority also expect the bank to stick to its view that its first rate hike since July 2011 will come later this year.

“We do not think that any potential disappointments in inflation ahead are going to be big enough for them to change their plans, especially if other central banks become more hawkish,” Hakan Frisen, Head of Economic Forecasting at SEB, said.

The Bank of England said earlier this week that it may tighten policy faster than expected, while the U.S. Federal Reserve is seen hiking rates three times this year.

Four analysts forecast that Sweden’s Riksbank would push back policy tightening, with two picking the fourth quarter of the year and two seeing it holding off until next year.

Central banks are moving at different speeds to normalise policy as global growth prospects brighten, and the Riksbank itself is split over how fast it should move.

CPIF inflation - the Riksbank’s target measure - has been roughly at the 2 percent target level for the last year, and expectations of inflation in five years are also on track.

Excluding volatile energy prices, however, inflation fell to 1.7 percent in December, having peaked last July.

While the Riksbank forecasts inflation will stabilise around current levels before picking up again in mid-year, many analysts see price pressures easing.

With the economic outlook both at home and abroad strong, the Riksbank could decide it can take a more relaxed view of any temporary dips in inflation.

Governor Stefan Ingves said recently that a few tenths of a percentage point here or there were not so important.

But after missing the inflation target for years, rate-setters may err on the side of caution before switching their policy stance.

Uncertainties about the housing market could also make the Riksbank more dovish.

“Inflation is not going to be high enough (for a mid-year rate hike) and growth is going to ease,” Nordea Chief Analyst Torbjorn Isaksson, said.

Nordea sees unchanged rates until the first quarter of 2019.

The Riksbank publishes its rate decision on Feb. 14.

Reporting by Simon Johnson and Johan Sennero; Editing by Hugh Lawson

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