UPDATE 1-Swedish central bankers still ready to ease further if needed -minutes
(Adds details, background, analyst comment)
STOCKHOLM, July 18 (Reuters) - Sweden's central bank must be
ready to use its balance sheet to stabilise inflation at its
target level and should remain vigilant over the exchange rate,
Riksbank chief Stefan Ingves said in the minutes of the bank's
latest rate-setting meeting.
At its July meeting the Riksbank edged closer to reversing
course after more than two years of negative interest rates,
saying it did not expect to cut borrowing costs again though it
did not close the door entirely on further easing. [nL8N1JV19F]
The minutes of the meeting showed Ingves underscoring the
need for the bank to stay the course on its monetary policy,
which currently sees no rate hike until the middle of next year
and includes a large-scale bond-buying programme.
"It is important that future rate increases are not
pre-empted. This is also true of speculations about the
Riksbank's bond purchases," the minutes quoted Ingves as saying.
"Inflation just touching two percent in the short term
is not stable enough. This means that the Swedish exchange rate
is one thing we need to keep an eye on."
Deputy Central Bank Governor Per Jansson also struck a
dovish note, saying he would "not hesitate for a moment" to
spearhead a decision to cut interest rates again if needed and
that he did not expect Riksbank policy to change tack soon.
"If the ECB continues to buy more assets next year, a
scenario expected on the financial markets, it will probably be
very difficult for the Riksbank to stop new purchases altogether
already at the turn of the year," Jansson said.
The central bank has kept its main rate at -0.50 percent and
continued its asset purchase programme despite strong GDP growth
and signs inflation is appoaching the elusive 2 percent target.
Still, the Riksbank's options have been limited as any
significant diversion from the European central bank's (ECB)
dovish policy would see the crown appriciate and make it even
harder to reach the inflation target.
"We thought it would sound soft, and it did, but it was a
step more dovish than expected," SEB economist Olle Holmgren
said of the Riksbank minutes.
"A rate hike is still far off."
(Reporting by Niklas Pollard and Johan Ahlander)
((Niklas.Pollard@thomsonreuters.com; +46 8 700 1110; Reuters
Keywords: SWEDEN CENBANK/MINUTES (UPDATE 1)