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POLL-Swedish c.bank seen waiting longer to hike rates

Published 12/10/2009, 09:31 AM
Updated 12/10/2009, 09:33 AM

* Rate expectations shift closer to c.bank forcast

* Analysts see first hike later than in previous poll

* Next Riksbank rate announcement on Dec. 16

STOCKHOLM, Dec 10 (Reuters) - The Swedish central bank will make its first hike in interest rates later than previously expected, as a recovery in the Nordic nation looks as if it may be losing some traction, a poll on Thursday showed.

The Riksbank has forecast it will keep its key repo rate at the current record low of 0.25 percent until the autumn of 2010, but analysts have widely predicted rates would not remain on hold that long.

All 21 economists in a Reuters poll were united in seeing rates on hold at the Riksbank's next monetary policy meeting.

Ten of the analysts saw rate hikes starting in April next year or at the central bank's following meeting in July.

This compared with 13 of the 18 analysts in the previous survey who saw a hike from the current record low of 0.25 percent coming some time between the start of next year and July.

All the remaining analysts in the latest poll picked the third quarter next year or later for the first hike.

Handelsbanken economist Stefan Hornell pointed to three reasons why his bank had pushed back its forecast for a rate hike to July from April.

First is the central bank's relaxed attitude to current consumer credit growth. Second is that he believes the Riksbank will wait for clear signs of an improvement in the job market before hiking.

"Then, I think that industrial data has been a little weaker than expected," he said.

Output in Sweden and across Europe in October was surprisingly soft. [ID:nGEE5B90XZ]

STILL FRAGILE

Sweden's economy inched out of recession in the second quarter this year and, with the global recovery also solidifying, most analysts believed then the central bank would be forced to hike rates earlier than its own forecast of late next year.

At its last meeting in October, however, the central bank surprised many by keeping its rate path forecast unchanged.

"They didn't make the revisions to the rate path I had expected in October, despite the fact that data had come in much better than expected, so I think it is unlikely they will signal a hike as earlier as I thought previously," said Peter Kaplan, chief economst at RBS.

He now sees the Riksbank hiking in April next year rather than in February as he had forecast in October.

Since the last central bank meeting, data has given those who banked on a quick and strong economic recovery in Sweden pause for thought.

Growth in the third quarter came in well below expectations at 0.2 percent quarter-on-quarter against a forecast of 0.6 percent in a Reuters poll. [ID:nGEE5AQ0H8]

This week, figures showed industrial production continued to fall on a monthly basis in October, defying hopes that the bottom of the cycle had been reached and casting doubt on the strength of growth in the fourth quarter. [IR:nGEE5B80JT]

Against this, the outlook for the labour market has improved, the retail sector is robust and confidence indicators point upward.

The central bank next meets to decide monetary policy on Dec. 15 with its decision published the following day. (Reporting by Daniel Dickson, Johan Sennero and Love Liman)

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