Jan 8 (Reuters) - Softer than expected December Swedish flash inflation data suggests there might be room for two more Riksbank rate cuts, in January and May.
The central bank adopted a more cautious stance at its last policy meeting in December as the focus appeared to have shifted from economic growth back to the inflation trend.
December flash CPIF came in well below the central bank's 2.0% target at 1.5% year-on-year. The Riksbank had seen prices rising by 1.8% and the Reuters poll consensus was for a 1.7% return.
The minutes from the last central bank meeting highlighted caution and the likelihood of just one more rate cut within the current easing cycle. While a steady interest rate stance would support the SEK it could also derail a recovery in the economy.
Swedish resource utilisation is low, and the labour market remains weak, which argues for possibly two more rate cuts, in January and May. However, the central bank is less optimistic than analysts on the inflation outlook.
EUR/SEK is little moved on the data but encouraging inflation numbers might bolster investor confidence and add fresh impetus to the Riksbank's easing cycle. For more click on
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(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
((peter.stoneham@thomsonreuters.com))
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