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(Corrects name of af Jochnick in para 17)
* Deputy govs Jansson and Wickman-Parak considered bigger
* Analysts say minutes dovish, raise chance of another rate
By Simon Johnson
STOCKHOLM, Jan 8 (Reuters) - Sweden's central bank
considered a bigger rate cut last month before deciding on a
quarter point reduction, the minutes of its meeting showed,
bolstering market expectations it will ease policy again by
April at the latest.
After a strong start to last year, Sweden's export-dependent
economy has slowed sharply. It could even have contracted in the
final quarter of 2012 and analysts reckon the central bank will
cut the repo rate again.
The Riksbank, which cut interest rates three times last year
including last month, had appeared reluctant to ease policy
further due to concerns about household debt levels. However,
the December minutes, released on Tuesday, showed a shift in
The bank considered a 50 basis point cut in the repo rate,
the minutes showed, before settling on a quarter point reduction
to 1.0 percent.
"You get the impression that a 50 point cut was more on the
cards than one might have thought and that raises the chances
for a cut in February," said Olle Holmgren, an economist at SEB.
The market is pricing in a roughly 34 percent chance of a
cut in February and a near 70 percent chance of a cut in April,
according to SEB.
The Swedish crown weakened to around 8.57 to the euro at
1021 GMT after publication of the minutes, from around 8.53
Yields on two-year Swedish debt were also lower.
Previously, hawkish deputy governors Barbro Wickman-Parak
and Per Jansson both mulled the idea of a bigger cut before
backing the smaller reduction last month.
Jansson warned the economy could underperform the Riksbank's
forecast for a 0.2 percent quarterly contraction in gross
domestic product in the fourth quarter of 2012.
"Mr Jansson said that he could easily see developments
being even weaker than now assumed in the draft Monetary Policy
Update," the minutes said.
However, Jansson said that a more cautious approach would
sit better with worries about high levels of household debt.
Weaker domestic conditions also prompted Wickman-Parak to
turn more dovish after saying she had initially advocated no
change in policy or the repo rate path.
She also considered a 50 basis point cut - something she
said could have some advantages - but said it probably would not
help the economy much.
"Cutting the repo rate by 50 basis points would have the
effect of surprise, which could affect the krona exchange rate
and provide some support to exports," she said, according to the
"But this support should not be exaggerated, as the problem
essentially concerns weak demand from abroad."
Deputy governor Kerstin af Jochnick, another of the more
hawkish rate setters on the six-person board, said she was less
worried about household debt levels.
"Given the weak economic situation and the pessimistic
household sector, she envisaged limited risks from household
debt in the short term," the minutes said.
Long-term dove Deputy Governor Lars Svensson wanted a 50
point cut in December. Deputy Karolina Ekholm supported the rate
cut but favoured easier policy ahead.
Announcing its rate decision last month, the central bank
said it expected policy to stay on hold for the coming year,
though it left open a very slight chance of a cut.
Recent data, such as industrial production and PMI, point to
a worsening in the economic outlook.
Toughening conditions for exporters such as truck maker
Volvo and mining equipment firm Atlas Copco
are showing in signs of increasing unemployment and
fading consumer confidence.
The Riksbank is due to announce its next rate decision on
(Reporting by Patrick Lannin, Niklas Pollard, Helena Soderpalm
and Daniel Dickson; Editing by Alistair Scrutton and Susan