Swedish Riksbank leaves repo rate unchanged at 4 pct UPDATE

Swedish Riksbank leaves repo rate unchanged at 4 pct UPDATE

	Published : Wed, 19 Dec 2007 10:05 By : Agencies Print this Story

(updating with growth seen weaker than in Oct report)

STOCKHOLM (Thomson Financial) - The Swedish Riksbank said it has left its key repo rate unchanged at 4.00 pct, and that its view of the future repo rate path remains largely the same as in October.

During the first half of 2008, the repo rate is expected to be raised to around 4.25 pct, the Riksbank said, but added there is 'considerable uncertainty due to the turmoil in the international financial markets'.

The development in the repo rate is expected to contribute to an inflation rate in line with the 2 pct target from 2009 onwards, whilst production and employment are also expected to develop in a balanced manner, the Riksbank added.

The Swedish economy has recently slowed down more than expected, partly due to the turmoil on financial markets and weaker developments abroad, the central bank said, adding it expects growth in Sweden to be weaker than it assumed in its October Monetary Policy Report.

At the same time, inflation has also risen more than expected, primarily due to an unexpectedly large rise in energy and food prices, said the Riksbank.

CPI and CPIX was 3.3 pct and 1.9 pct respectively in November, it added.

It said it expects inflation to be higher in 2008 than was previously expected, but that its main scenario is that it will then fall back in line with the October forecast.

'Higher inflationary pressures indicate that the repo rate could need to be raised slightly more in the future, but signals of weaker economic activity in Sweden and abroad together with the continued turmoil in the international financial markets point in the opposite direction,' the Riksbank said.

gustav.sandstrom@thomson.com

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