BUZZ-COMMENT-Swedish interest rates are likely to remain stable

Feb 20 (Reuters) - Swedish interest rates might be cut by a further 25-basis points at the May Riksbank meeting but analysts are beginning to lean more towards a no change decision as the inflation rate climbs clear above the central bank's target.

When considered in isolation, the 2.2% year-on-year CPIF increase for January strongly supports maintaining rates at the current 2.25% level.

The pickup on consumer prices is likely to be slowed by the recent recovery in the Swedish crown. However, the Riksbank's easing cycle is beginning to feed through to the economy and coupled with expansive fiscal policy could negate the need for further rate cuts.

Versus the euro, the crown has appreciated by 3.0% this month and by 5.5% since November. EUR/SEK has fallen for 13 out of the last 14 days and the bear trend could extend further. The June 2024 11.1450 low provides a target and then the 11.1320 low from March 2024 comes into view.

Interest rate differentials should underpin the SEK rally with the European Central Bank inflation expectations pointing to rate cuts and a key rate eventually dropping below the Riksbank's 2.25% benchmark.

Uncertainty surrounding global trade, economic growth, and geopolitical risks continues to shape investor sentiment. As a result, both the Swedish economy and the crown remain vulnerable, presenting a potential double-edged sword for the Riksbank.

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