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Riksbank leaves base rate unchanged

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Riksbank leaves base rate unchanged
09:33 CEST+02:00
Sweden's Riksbank has left the main repo rate unchanged at 2 percent and has delayed any rises well into 2012, meeting market expectations.

"The difficulties in resolving the public finance crisis in Europe has led to increased uncertainty regarding the future. In Sweden, growth is expected to be slightly weaker in the coming period," the bank wrote in its decision.

The bank furthermore deemed inflationary pressure to be sufficiently low to support leaving the rate unchanged.

The Riksbank expects the repo rate to be an average of 2.2 percent during 2012, down on a previous forecast of 2.4 percent. For 2013 the bank cut its forecast from 2.9 percent to 2.7 percent.

The bank expects "unease abroad" to subdue the Swedish economy in the near future.

"The difficulties in creating a long-term solution to the public finance problems in both the United States and the euro area have increased uncertainty regarding the future," the bank wrote.

"The fiscal policy tightening will dampen economic growth in the United States and the euro area in the coming years."

The bank's decision was expected with all eighteen analysts in a Reuters survey last week counted on the repo rate remaining unchanged. 15 of 16 expected the Riksbank to cut the forecast for how the repo rate would develop.

The bank underlined that there was "great uncertainty over economic developments" explaining that new information may lead to a reassessment of interest rate forecasts.

One of the alternative scenarios under consideration is that the financial turmoil will calm down sooner than expected and lead to swifter recovery in the eurozone, raising the prospect of higher base rates in Sweden.

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