-minutes@ (Adds details, background, analyst comment)
STOCKHOLM, July 18 (Reuters) - Sweden's central bank must be ready to use its balance sheet to stabilize inflation at its target level and should remain vigilant over the exchange rate, Riksbank chief Stefan Ingves said in the minutes of the bank's latest rate-setting meeting.
At its July meeting the Riksbank edged closer to reversing course after more than two years of negative interest rates, saying it did not expect to cut borrowing costs again though it did not close the door entirely on further easing.
The minutes of the meeting showed Ingves underscoring the need for the bank to stay the course on its monetary policy, which currently sees no rate hike until the middle of next year and includes a large-scale bond-buying program.
"It is important that future rate increases are not pre-empted. This is also true of speculations about the Riksbank's bond purchases," the minutes quoted Ingves as saying.
"Inflation just touching two percent in the short term is not stable enough. This means that the Swedish exchange rate is one thing we need to keep an eye on."
Deputy Central Bank Governor Per Jansson also struck a dovish note, saying he would "not hesitate for a moment" to spearhead a decision to cut interest rates again if needed and that he did not expect Riksbank policy to change tack soon.
"If the ECB continues to buy more assets next year, a scenario expected on the financial markets, it will probably be very difficult for the Riksbank to stop new purchases altogether already at the turn of the year," Jansson said.
The central bank has kept its main rate at -0.50 percent and continued its asset purchase program despite strong GDP growth and signs inflation is appoaching the elusive 2 percent target.
Still, the Riksbank's options have been limited as any significant diversion from the European central bank's (ECB) dovish policy would see the crown appriciate and make it even harder to reach the inflation target.
"We thought it would sound soft, and it did, but it was a step more dovish than expected," SEB economist Olle Holmgren said of the Riksbank minutes.
"A rate hike is still far off." (Reporting by Niklas Pollard and Johan Ahlander)