By Simon Johnson
STOCKHOLM (Reuters) -Swedish monetary policy needs to remain tight for some time and the policy rate may need to be raised further if the inflation outlook deteriorates, the minutes of the central bank's most recent meeting, published on Monday, showed.
Late last month, the central bank kept its key policy rate unchanged at 4.00%, saying eight rate hikes in a row were now having an effect and that inflation was heading in the right direction.
"It is now a question of ensuring that inflation will come all the way down to the target of two per cent and that it will stabilise there," Governor Erik Thedeen said in the minutes.
"If new data is received that indicates inflation is not continuing its downward trend towards the target, we have plenty of opportunity to take action at coming meetings."
The Swedish crown strengthened marginally after the minutes were published.
Inflation, which peaked at over 10%, is still way above the 2% target and the Riksbank remains worried about the direction of prices for goods and services as well as the weak Swedish crown.
Several policy makers said that policy needed to remain restrictive for some time in order to ensure that inflation comes back to the 2% target.
Markets, however, believe the Riksbank is probably done with hiking and see the next rate move being a cut after the middle of next year.
Inflation is falling fast and the effects of rate hikes to date have not been fully felt. The economy is in a technical recession and is expected to shrink on an annual basis both this year and next. Households and property firms are already struggling with debts.
"We expect the Riksbank to stay on hold for now and start cutting by June," Swedbank said in a note.
The Federal Reserve, the European Central Bank and the Bank of England are also expected to cut next year.
The Riksbank will publish its next rate decision on Feb 1.
(Reporting by Simon Johnson, Terje Solsvik, Anna Ringstrom, Niklas Pollard and Johan Ahlander; editing by Niklas Pollard)