Swedish interest rates will rise from their current historic low sometime next year, the head of the central bank said on Wednesday, removing any expectation a tightening could start in December.
The bank, which cut its key repo rate by 50 basis points to 1.50 percent in June, had already said its next move would be up, although it had seen no hurry for the move.
Sweden's low rates are one of the reasons the crown has fallen strongly against both the dollar and the euro in recent weeks. The central bank said this weakness could feed inflation.
"Given the information we have now, the financial markets' expectations of a repo rate increase some time next year appear reasonable," said central bank chief Lars Heikensten.
"As I see it, this conclusion is supported by the strong growth in the real economy and the increased risks that follow on from a continued rise in house prices," he added, according to the text of a speech released by the bank.
The June rate cut, which was bigger than expected, came on the back of weak first quarter economic growth.
The economy has picked up since then and the bank expects inflation to be nearing its target of 2 percent in a couple of years. Second quarter gross domestic product growth was 2.3 percent after 1.8 percent in the first three months of the year.
House prices have also risen strongly, fuelled by banks competing for customers against the background of low lending rates.
Analysts said Heikensten was removing any doubts over a possible rate hike this year. Otherwise the message remained that of an improving economy and rising but subdued inflation.
"The market reaction is not very big," said SEB Merchant Banking analyst Robert Bergqvist.
"I think the market is interpreting this as meaning that even if there is not a rate hike in December, Heikensten is confirming that the economy nevertheless has good momentum."
In a Reuters poll at the end of October, the majority of analysts said they expected the central bank to start raising rates in the first quarter of next year.
The Riksbank next meets to review rates on December 1 with its decision announced the next day.
The crown was steady against the euro at around 9.60, although it lost ground to the dollar, which jumped against many currencies after record US capital inflows. The crown was at 8.24 to the dollar versus 8.21 before Heikensten's speech.
Inflation was expected to rise, Heikensten said, due the stronger oil price and a rising take up of slack by industry.
A weakening currency was one factor that was increasing the risk for higher price pressure, he added. "even if we should not - as I see it - change our basic assessment that the krona will strengthen, its value at present is rather different," he said.
"There is therefore reason to take into consideration a risk scenario for inflation linked to a weaker exchange rate," he said. The crown has recently hit two-year lows against the dollar and three-year lows against the euro.