Riksbank holds rates but keeps door open to hike later this year.

Source: Sharecast

The Riksbank's Executive Board kept its policy rate at 1.75%, saying the overall economic outlook remained "largely unchanged" despite recent upside surprises.

It said inflation had exceeded its June forecast during the summer, while underlying inflation (excluding energy prices and the direct effects of temporary fiscal policy measures) was relatively close to 2%. GDP growth also appeared to have been stronger than forecast and economic sentiment had "clearly improved".

However, measured inflation remained low, partly due to temporary fiscal measures, while unemployment was high and labour-market developments had been somewhat weaker than expected. Companies' pricing plans were also subdued, though disruption to global supply chains had eased.

The central bank nevertheless highlighted continued risks from supply shocks linked to the conflict in the Middle East, despite oil and some other commodity prices having fallen since surging at the onset of the crisis in the spring.

"The Executive Board therefore assesses that it is a well-balanced policy to leave the policy rate unchanged, and that the probability of a rate increase later this year remains," the Riksbank said.

It added that if unexpectedly high inflation over the summer marked the beginning of a "larger and more lasting upturn", monetary policy would be tightened.