STOCKHOLM (dpa-AFX) - Sweden's central bank left its key interest rate unchanged on Thursday, as expected, and signaled that it will hike rates in future at a slower pace. The Executive Board of Riksbank decided to hold the repo rate unchanged at -0.25 percent.
'As before, the interest rate is expected to be raised towards the end of the year or at the beginning of next year,' the bank said.
'However, low interest rates abroad and worsened sentiment mean that the interest rate is expected to be increased at a slower pace thereafter than in the previous forecast.'
The repo rate was last hiked in December in an unexpected move, the first increase since July 2011. Swedish interest rates entered negative territory in early 2015.
The bank expects GDP growth to be a little lower than it forecast in July. The labor market slowdown seems to be slightly faster than previously assessed, the bank said.
The GDP growth forecast for this year was cut to 1.5 percent from 1.8 percent. The outlook for next year was lowered to 1.5 percent and 1.6 percent. The projection for 2021 was raised to 1.9 percent from 1.8 percent.
The Riksbank said a substantial fall in market rates, low global interest rates and worsened sentiment signal the need to proceed cautiously with monetary policy.
'There are still major risks that may affect economic developments,' the Riksbank said.
'If the economic outlook and inflation prospects were to change, monetary policy will be adjusted,' the bank added.
The central bank retained the inflation forecast for this year at 1.8 percent, while trimmed the outlook for next year to 1.9 percent from 2.2 percent.
Core inflation forecast was left unchanged at 1.7 percent and the projection for next year was cut to 1.7 percent from 1.8 percent.
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