MNI BRIEF: Policy Reflects Lower Neutral Rate - Riksbank Seim

The wide gap between the Riksbank's and Norges Bank's policy rates reflect a mix of factors, including Sweden's recent krona strength, lower neutral rate and inflation expectations, Riksbank Deputy Governor Anna Seim said at a Norges Bank conference Monday.

The key Riksbank policy rate is at 1.75% compared to Norges Bank's 4.0%. Seim said that analysis suggested that the Norwegian central bank has attached "a slightly larger weight to the real economy than the Riksbank," but that this was far from the only answer. Norges Bank's policy rate should "be viewed in the light of the slightly higher neutral rate in Norway" and "long term inflation expectations are somewhat closer to target in Sweden," with no compensatory wage in Sweden during the recent inflation surge, she said

In the January Riksbank minutes Seim said the policy rate was "close to neutral," the strong krona had dampened price pressures and concerns over upside inflation risks had eased. (see MNI INTERVIEW: Higher Bar To Future Riksbank QE - Thedeen )