* Cuts repo rate to 0.75 pct from 1.00 pct as expected
* Rate path forecast suggests slim chance of further cuts
* First anticipated hike pushed back to early 2015
(Recasts, adds comments from central bank head)
By Simon Johnson and Daniel Dickson
STOCKHOLM, Dec 17 An unusually united Swedish
central bank trimmed its key interest rate as expected on
Tuesday, sidelining concerns about high debt levels to focus on
pushing up low inflation and signalling an outside chance of
Sweden's economy has been stuck in low gear for most of this
year and consumer prices fell in October and November. That led
analysts in a Reuters poll to correctly predict the Riksbank
would cut the repo rate, by a quarter point to 0.75 percent, for
the first time in a year.
Most of the central bank's rate-setting council have been
reluctant to ease policy up until now in case that spurred more
borrowing in a climate of already high levels of household debt.
But on Tuesday the six-member body said a weak inflation
outlook meant it was time to cut borrowing costs, reaching a
unanimous policy decision for the first time in more than two
"The risks linked to high household indebtedness remain, but
the low inflation rate justifies cutting the repo rate," the
central bank said in a statement.
The Riksbank said inflation was likely to be much lower in
the year ahead than it had anticipated in recent forecasts and
said it did not expect rates to rise until the start of 2015,
having previously expected to start hiking at the end of 2014.
It also forecast that the interest rate would average 0.71
percent in the fourth quarter of 2014, indicating a small chance
of another cut and sending the crown currency lower against the
"They went a step further than what we had in our main
scenario, signalling that there is a possibility of a further
cut," SEB economist Olle Holmgren said.
Asked if there could be a further rate cut before 2015, bank
Governor Stefan Ingves told a news conference: "Not as we see it
today. The most likely thing is that rates remain at the current
The Swedish crown was trading at 9.06 to the euro at 1105
GMT, close to its weakest against the single currency since
The Riksbank has been performing a balancing act all year.
Growth has been weak and inflation has undershot the
Riksbank's target for well over two years.
However, the economy has been expected to pick up and the
majority of the Riksbank's board have worried about a housing
House prices have nearly tripled in the last 15 years and
household debt levels are among the highest in Europe, leaving
the economy vulnerable to shocks.
"If households were to reduce their debts quickly, there is
a risk that unemployment would rise sharply and that long-term
difficulties in stabilising inflation around the inflation
target might arise," the central bank said.
The Riksbank said it now expected bigger increases in house
prices and debt - which it expects to reach 178 percent of
disposable income by 2016 - than it had forecast in October.
The government has recently put the country's financial
watchdog, the Financial Supervisory Authority (FSA), in charge
of controlling overall risks to the economy and it has tightened
up rules for both borrowers and lenders.
This has led analysts to speculate the central bank would
focus less closely on household debt levels and put greater
emphasis on reaching its inflation target.
"They are obviously passing the ball to the FSA and others
when it comes to household debt, at least to a larger extent
than they have in past," Torbjorn Isaksson, economist at Nordea
(Reporting by Stockholm Newsroom; Editing by John Stonestreet)