UPDATE 1-Swedish cbanker cautious, but sees no housing bubble

VIENNA, Nov 16 (Reuters) - There are no signs of a new house-price bubble building in Sweden although there are reasons for caution, Swedish central bank deputy governor Karolina Ekholm said on Monday. The Nordic country's key repo rate is at a record low of 0.25 percent and the Riksbank has said it will stay there probably until autumn next year.

Financial markets are pricing in a rise in rates somewhere between March and June next year. However, the bank's board has been unusually divided over monetary policy, with one member wanting zero rates at the last meeting and two wanting rates to move up faster than currently forecast. Ekholm, who was appointed to the board earlier this year, backed the decision to keep rates at 0.25 percent and the rate path. She said on Monday that the board, while divided on some points, was united on the main issues. "I think the division is a little bit exaggerated in the press, the dissenting opinions are really about very minor things," Ekholm told reporters on the sidelines of a conference in Vienna. "We are now still in a recovery phase, things are improving, households are becoming more optimistic, and in some sectors the firms are becoming more optimistic," she said. With economies showing patchy but significant signs of recovery, central banks round the globe have a tough job in weighing when to tighten currently ultra-loose monetary policy. Most have argued that economic recovery is to a great extent dependent on low rates and other measures by authorities to boost growth. One worry, however, is that keeping monetary policy too loose for too long will lead to an unsustainable rise in asset prices, particularly houses. "I am a little bit concerned about the fast expansion of household credit and increased house prices in Sweden. I think an interest rate cut would be very difficult," Ekholm said. "It would be very difficult for us to cut the interest rate at the same time as we are trying to argue that house prices are moving upward too fast." In the third quarter, lending to households recovered to pre-crisis levels, according to the country's statistics office. (Editing by Patrick Graham) Keywords: SWEDEN CBANK/EKHOLM (Via Stockholm Newsroom, tel: [phone], e-mail: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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