Swedish central bank signals May or June rate cut

STOCKHOLM, Mar 28 (AFP): Sweden's central bank on Wednesday kept its key interest rate at a 16-year high, but forecast a possible cut in May or June if inflation stays under control.

The Riksbank said that while "inflation is in the process of stabilising at the target" of two per cent, it added that "inflationary pressures are still somewhat elevated."

Swedish inflation slowed sharply in February to 4.5 per cent year-on-year. The bank's benchmark indicator, adjusted for fixed interest rates (CPIF), reached 2.5 per cent.

"It is likely that the policy rate can be cut in May or June if inflation prospects remain favourable," the Riksbank said in a statement.

But it added that given the high inflation seen in recent years, its executive board "wants further confirmation that inflation will stabilise close to the target."

In September, the central bank raised its key rate to four per cent, its highest level since 2008.

The decision to leave it unchanged on Wednesday was widely expected among analysts.