Sweden's Riksbank Sits Tight as Currency Strengthens

By Nina AdamFeaturesDow Jones Newswires

Sweden's central bank on Thursday signaled that a small interest rate increase is still many months off--highlighting the caution of Europe's central banks as they try to balance the effects of a strengthening currency and an improving economy.

"Monetary policy needs to remain expansionary for inflation to continue to be close to 2%," the Riksbank said, noting that it does not expect to lift the repo rate from its current record low of minus 0.5% "until the middle of 2018."

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A strengthening national currency may have also influenced the decision. "It is important for the development of inflation that the krona exchange rate does not appreciate too quickly," the Riksbank said, after the krona appreciated almost 3% since mid-June. A stronger currency doesn't only hurt the international competitiveness of Sweden's exporters, it also reduces the price of imports, and hence weighs on the outlook for inflation.

Write to Nina Adam at nina.adam@wsj.com

(END) Dow Jones Newswires

September 07, 2017 04:54 ET (08:54 GMT)