UPDATE 2-Swedish central bank not rushing to exit pandemic policies

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* Some policy makers discuss a rate hike at the end of the forecast period

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*Temporarily observed inflation spurt

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* No need for central bankers to react in the short term (adds analyst quote, recent move by Norway c.bank)

STOCKHOLM, Sep 30 (Businesshala) – Swedish central bankers are in no hurry to abandon pandemic response measures despite a strong economic recovery and above-target inflation, minutes from their most recent policy meeting showed on Thursday,

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While he saw the risks of moving too quickly to tighten policy as well as the risks of going too slowly, a cautious change could be coming.

“Some members discussed a rate path that could indicate a rate hike at the end of the forecast period,” the Riksbank statement said.

Similar views were expressed by some central bankers in the last policy meeting.

Some policymakers also mentioned the option of allowing the Riksbank to shrink its balance sheet next year.

“Compared to the July meeting, the Riksbank has clearly moved, from the risk of rate cuts to discussions about exiting stimulus measures,” Nordea analyst Torbjörn Isaacson said in a note.

The Swedish economy has recovered from the pandemic faster than many other European countries and inflation is expected to be above 3% next year, well above the 2% target.

But the Riksbank currently believes that the price pressure will ease once the bottlenecks and supply problems related to the pandemic ease and energy price growth eases.

“It is too early to change course,” Governor Stephen Ingwes said in a statement.

The central bank did not announce any major policy changes on September 21, although it said it would discontinue loan programs launched during the pandemic.

With the gradual opening up of economies, many central banks are beginning to plan when and how to normalize monetary policy.

Neighboring Norway has already raised rates with more to come. The European Central Bank is expected to announce the end of its emergency bond purchases in the spring of next year.

In Sweden, the COVID-19 restrictions have mostly ended and the economy is already back to its pre-pandemic size.

Riksbank’s asset purchase program is due to end this year and it expects its balance sheet to remain unchanged in 2022.

The benchmark repo rate is expected to remain at 0% until at least the third quarter of 2024.

Reporting by Simon Johnson; Editing by Johan Ahlander and Edwina Gibbs

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