By Charles Duxbury
STOCKHOLM--Sweden's central bank has decided against any
dramatic new policy moves in the face of subdued inflation and
slowing growth, opting instead for a promise to keep rates low for
longer and listing the unconventional policies that it might turn
to.
The central bank, which held its main lending rate at zero on
Tuesday, has been under pressure from labor organizations and some
economists here to take decisive action to lift an inflation rate
which has been negative for the past four months.
While the economy here is still posting steady growth, concerns
are rising that Sweden is flirting with deflation, a situation
where prices fall persistently, sapping consumers' will to spend
and making debts harder to service.
The central bank surprised the market in October when it cut its
main rate to zero seeking to reverse the inflation slide but this
time left rates unchanged after a policy meeting.
Governor Stefan Ingves said lower oil prices meant the Riksbank
needed to cut its inflation forecasts again despite a weaker
currency. Still, the six member board stopped short of
unconventional policy measures.
Instead the board voted unanimously to postpone a first rate
hike until later 2016 from mid-2016.
The central bank said if more expansionary policy were needed in
the future, its next step would be to continue to postpone
increases to its main rate.
Mr. Ingves also took the chance to be more specific about what
they bank will do beyond that if the outlook for inflation were to
continue to worsen.
At his news conference he listed four broad options: asset
buying; lending to banks; a negative main rate; currency market
interventions.
He didn't give an order of preference for the eventual measures
other than to say a move into the currency market, while not ruled
out, is the bank's least favored option.
The first three could also be combined, Mr. Ingves said, and
wouldn't have to come one after another.
Trading in the Swedish krona was choppy but by midafternoon in
Europe the euro was close to being back where it started the day,
at 9.50 Swedish kronor.
Analysts were divided in their assessment of how Riksbank policy
will develop next year.
James Pomeroy at HSBC bank said inflation probably wouldn't rise
as fast as the Riksbank expected and the central bank will have to
respond by cutting the main rate into negative territory next
year.
Nordea bank analyst Torbjorn Isaksson said that while the
Riksbank may go as far as postponing rate hikes still further he
judged the use of other monetary policy measures as "not
particularly likely".
Write to Charles Duxbury at charles.duxbury@wsj.com
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