STOCKHOLM: Sweden's central bank is seen holding its benchmark repo rate unchanged next week, but will postpone plans to begin normalising ultra-loose policy after signs that inflation pressures have eased, a Reuters poll of analysts showed.
The Riksbank has held the repo rate at -0.50 percent since early 2016, despite a robust economy and an improving global picture, as it looks to rebuild faith in markets that it can meet its 2 percent inflation target after years of undershooting.
Negative rates and more than 300 billion crowns ($35.65 billion) of bond buys pushed up prices last year. But the pace of inflation has dipped again, forcing the Riksbank to adjust plans that had pencilled in a first hike mid-year.
"They want to make sure actual inflation is near the target for a long enough period in order to secure confidence in the inflation target," SBAB economist Robert Boije said.
All 21 analysts in the poll forecast no change in rates on April 26, when the Riksbank announces its next policy decision. Two saw the first hike in the third quarter, with 13 analysts expecting the Riksbank to wait until the final three months of the year.
Three analysts saw rates remaining unchanged into next year. Not all those polled answered all questions.
The central bank revised down its forecasts for inflation at its February meeting, when it also tweaked its forecast for the repo rate, saying it saw the first hike since July 2011 coming in the second half of the year.
It kept the rate path unchanged, however, shifting even greater focus onto monthly inflation outcomes.
These have proved disappointing.
The Riksbank's favourite inflation measure CPIF, which excludes the effect of mortgage rates, was 2.0 percent in March, but other measures have given a less rosy picture.
Excluding volatile energy prices, inflation was just 1.5 percent and has been trending down since last summer.
Analysts expect another downgrade in the Riksbank's inflation forecast next week.
However, ultra-loose policy looks increasingly out of step with an economy that is expected to expand 2.8 percent in 2018 after years of rapid growth.
Worries about falling house prices are abating.
Furthermore, the crown is around its weakest levels since 2010, on a trade-weighted basis, undermining the Riksbank's argument that rate hikes would press down import prices through a stronger currency.
With a looming trade war between the United States and China as well as worries about Russia, some analysts question whether the Riksbank will be able to raise rates before the next economic downturn, leaving it with a much-depleted policy arsenal.
Deputy Governor Henry Ohlsson voted for a hike in February.
The majority of rate-setters, however, have urged caution, arguing the risks of hiking too soon are greater than those of waiting.
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