By Simon Johnson

STOCKHOLM (Reuters) - Need a cheap, reliable second-hand car? Think Sweden, where a nosedive in the local crown currency over the past 18 months is proving a blessing for used-car dealers and other exporters.

But 20 years after Swedes voted in a referendum to stay out of Europe's single currency, the crown's 17.5% slide against the euro is not making everyone happy. Many in a nation used to high living standards are being forced to tighten their belts.

"Many foreign car dealers think there is a sale on in Sweden," Joachim Agren, senior key account manager at the Swedish branch of BCA, Europe's largest vehicle remarketing company according to its website, told Reuters. He said overseas buyers now account for the majority of its sales at auction, doubling their 30% share of recent years.

Purchasing power abroad has tumbled with the currency. In the second quarter, Swedes were the 12th biggest buyers of property in Spain, according to Registradores de Espania - four places lower than two years earlier and behind the Chinese.

Companies like KP Energy, which imports solar panels to sell to trade buyers, cite the damaging effects of higher purchase costs and rising interest rates, which hit household spending.

"It impacts us a huge amount when the crown weakens against the euro and when the demand picture changes," its CEO Filip Wiqvist said.

KP Energy had forecast strong growth this year after the market doubled in size in 2022. Now, it expects a contraction, even with Sweden and the European Union pursuing ambitious climate goals.

"The green transition is going to going to slow radically in the short term, with the euro-crown one of the reasons," Wiqvist said.

The weaker currency did help lift Sweden's exports by 6% in the year to July, despite slower global growth.

But currency volatility makes planning tricky even for exporters, said Jan Soderstrom, CEO of Quintus Technologies, which makes advanced presses used in sectors like aerospace and consumer electronics.

Higher import prices as a result of the crown's slide could also mean the central bank must keep interest rates higher for longer to fight inflation, piling pain on households and businesses struggling with loan repayment costs.

Another hike to 4.0% on Sept. 21 is widely expectedand banking group Nordea says another could come in November before policy tightening ends.

That could deepen and lengthen a downturn the EU already predicts will make Sweden one of the bloc's worst-performing economies this year.

"The Riksbank is between a rock and a hard place. On the one hand they want to get inflation down ... on the other hand they don't want to crash the economy," Nordea Chief Economist Annika Winsth said.

MYSTERY

Swedes feeling the pinch have warmed somewhat to the euro in recent months, though a majority want to stick with the crown.

A Demoskop poll this week showed 42% would vote "No" to joining the euro, while 34% would support it. On Sept. 14, 2003, 55.9% voted to reject membership, and no major party is pushing for a new referendum.

But why the crown has lost around 30% of its value against the single currency over the last 10 years is unclear.

Sweden's economy is strong, state finances are healthy - government debt is among the lowest in the EU - and its well-capitalized banks are among the region's most profitable.

In June, accounting firm KPMG said the crown was "mysteriously weak".

Analysts suggest a number of factors.

Like many central banks, the Swedish Riksbank's main policy rate was at zero or below from 2014 to 2022 and in 2016 it even threatened to intervene in the foreign exchange market to weaken the crown.

While the rate has risen to 3.75%, in line with the European Central Bank's, markets may still perceive the Riksbank is dovish, SEB Senior Economist Robert Bergqvist said.

The shocks of the 2008-9 global financial crisis, COVID-19 and the war in Ukraine may also have encouraged investors towards traditional safe-haven currencies.

The Riksbank's asset purchases in recent years have made crown securities less liquid, reducing their appeal for foreign investors. Uncertainty around Sweden's accession to NATO - prompted by Russia's invasion of Ukraine and currently blocked by Turkey - could also be a negative factor.

Sweden's real estate market, burdened by rising interest rates and heavy debts is a worry, although the Riksbank says there is little risk to financial stability.

It also says an economic slowdown will not be too deep, after Sweden's economy outperformed its European peers during the pandemic.

"If you look at pricing of bank equity or credit default swaps of the banks ... it doesn't seem to price that kind of risk on the Swedish economy, just on the exchange rate," central bank deputy governor Martin Floden said earlier this month.

Believing the crown is around 20% undervalued, the Riksbank has hedged its own foreign currency exposure in anticipation of future strengthening.

"We and many others are convinced the crown will strengthen at some time, but we would like to see it happen soon rather than over the long term," Floden said.

SEOUL (Reuters) - South Korea's central bank said on Thursday it needs to make coordinated efforts to contain household debt, which is at levels that could undermine economic growth and financial stability.

"Unlike in major countries, household debt increased continuously without de-leveraging and has reached a level that hinders macroeconomic and financial stability," the Bank of Korea (BOK) said in its quarterly monetary policy report.

"As financial imbalance must be managed below a certain level for stable growth in the mid- and long-term, it is necessary to continue making steady efforts for adjustment," the BOK said.

South Korea's household borrowing grew for a fifth straight month in August by the biggest amount in two years, driven up by rising mortgage demand, prompting financial authorities to tighten certain loan regulations.

The BOK said in the report it was more effective for macro-prudential policy to coordinate with monetary policy than for policy responses to be made in isolation.

South Korea's house prices, which snapped a 13-month decline in July, are "still over-valued" when compared with income and other economic factors, the BOK said.

Despite a slowdown in household debt growth during the latest monetary tightening cycle, the ratio to nominal gross domestic product (GDP) is still high, according to the BOK, "far surpassing" the threshold at which its negative impact on growth increases.

Central bank policy board members kept the door open for further rate hikes at their review in August, at which it kept interest rates unchanged, but they also flagged increased risks to economic growth, meeting minutes showed this week.

By Stephen Culp

NEW YORK (Reuters) - U.S. stocks advanced and U.S. Treasuries oscillated within a tight range on Wednesday after data showed underlying inflation remained on its slow, downward trajectory, boosting expectations that the Federal Reserve will let interest rates stand, for now.

The S&P 500 gained modestly and interest-rate sensitive mega caps, led by Microsoft Corp (NASDAQ:MSFT), gave the tech-heavy Nasdaq the edge.

The blue-chip Dow Jones Industrial Average was essentially unchanged.

U.S. consumer price (CPI) data showed prices heated up in August due to rising energy prices, but the "core" measure, which excludes volatile food and energy items, remained on its meandering path down to the Federal Reserve's average 2% annual inflation target.

"Since markets were weak the last few days, maybe people were fearing more core inflation than we saw," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "(The report) confirms the idea of the Fed waiting to see what further data show before a possibly hiking rates in November."

"CPI was slightly positive on a core basis, but surging gasoline prices affect retail sales," Tuz added. "The extra $20 you spend filling your tank is $20 less you spend on other things."

Financial markets have priced in a 97% likelihood of the Federal Reserve standing pat at next week's monetary policy meeting, leaving the key Fed funds target rate at 5.25%-5.50%, according to CME's FedWatch tool.

The Dow Jones Industrial Average fell 10.89 points, or 0.03%, to 34,635.1, the S&P 500 gained 9.8 points, or 0.22%, to 4,471.7 and the Nasdaq Composite added 59.92 points, or 0.44%, to 13,833.53.

European shares ended lower as investors looked beyond the CPI report and a drop in euro zone industrial production to focus their attention on this week's European Central Bank policy meeting.

The pan-European STOXX 600 index lost 0.32% and MSCI's gauge of stocks across the globe gained 0.10%.

Emerging market stocks lost 0.03%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.15% lower, while Japan's Nikkei lost 0.21%.

U.S. Treasury yields were range-bound in the wake of the CPI report, which suggested the Fed will keep interest rates steady at its upcoming meeting.

Benchmark 10-year notes last rose 5/32 in price to yield 4.2445%, from 4.264% late on Tuesday.

The 30-year bond last rose 8/32 in price to yield 4.3309%, from 4.346% late on Tuesday.

The greenback steadied against a basket of world currencies following the inflation data, which did little to move the needle regarding the Fed's expected rate hike pause.

The dollar index was flat, with the euro down 0.16% to $1.0735.

The Japanese yen weakened 0.22% versus the greenback at 147.40 per dollar, while Sterling was last trading at $1.2491, up 0.06% on the day.

Oil prices dipped as a surprise U.S. inventory build helped market participants look past expectations of tight supply.

U.S. crude slipped 0.36% to settle at $88.52 per barrel, while Brent settled at $91.88 per barrel, down 0.2% on the day.

Gold prices edged lower, hovering near two-week lows after the CPI report helped give the dollar a slight boost.

Spot gold dropped 0.2% to $1,909.19 an ounce.

LONDON (Reuters) - British house prices showed the most widespread falls in 14 years in August as demand weakened against the backdrop of elevated mortgage costs and economic uncertainty, an industry survey showed on Thursday.

The Royal Institution of Chartered Surveyors (RICS) house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in house prices, slumped to -68 in August from -55 in July.

Thursday's house price balance marked the weakest reading since February 2009 and was below the -56 forecast in a Reuters poll of economists.

Simon Rubinsohn, chief economist at RICS, said the survey pointed to a sluggish housing market with little sign of relief in prospect.

"Prices are continuing to slip albeit that the relatively modest fall to date needs to be seen in the context of the substantial rise recorded during the pandemic period," Rubinsohn said.

The survey results echoed other signs of slowdown in the property sector.

Mortgage lenders Halifax and Nationwide have both shown prices falling in monthly terms as the Bank of England's sustained run of interest rate rises, persistent inflation and a prolonged cost-of-living crisis squeeze home-buyers.

Official figures, released on Wednesday, showed the country's economy shrank by a sharper-than-expected 0.5% in July after public sector strikes and unusually rainy weather weighed on output.

Overall across Britain, RICS' measure of agreed sales was the weakest since April 2020 when much of the property sector was on lockdown due to the COVID-19 pandemic, and new buyer enquiries fell marginally from the month before.

In the rental market, tenant demand continued to outstrip landlord instructions, limiting the number of available homes to rent, while a net balance of +60% surveyors expect to see a rise in rental prices over the coming three months.

Separate figures from property website Zoopla on Thursday showed the joint-highest rental affordability squeeze, with tenants spending 28.4% of their earnings in July on rent.

By Prerana Bhat

BENGALURU (Reuters) -The Federal Reserve will leave its benchmark overnight interest rate unchanged at the end of its Sept. 19-20 policy meeting and probably wait until the April-June period of 2024 or later before cutting it, according to economists in a Reuters poll.

Fed Chair Jerome Powell underscored the "higher-for-longer" mantra for rates in a speech at the annual Jackson Hole central banking symposium in August and maintained another rate hike might still be needed to bring inflation down to the 2% target.

But other members of the rate-setting Federal Open Market Committee (FOMC), including some of the more hawkish ones, have raised the possibility of holding off on another rate hike to allow more time to gauge the impact of the cumulative 525 basis points of tightening delivered by the Fed since March 2022.

More than 95% of economists, 94 of 97, in the Sept. 7-12 Reuters poll predicted the U.S. central bank would hold the federal funds rate in the current 5.25%-5.50% range next week, in line with market expectations.

Still, nearly 20% of the economists, 17 of 97, predicted at least one more rate rise before the end of the year, including three who expected one this month.

"Though we continue to expect the Fed to remain on hold at the Sept. 20 FOMC meeting, we would not be surprised to see most officials continue to project one more rate hike by year-end in their updated 'dot plot,'" said Brett Ryan, senior U.S. economist at Deutsche Bank, referring to the interest rate projections released by Fed policymakers on a quarterly basis.

"While there has been meaningful progress to date on inflation ... the Fed will not be able to take this for granted."

Much of the immediate outlook for Fed policy will depend on the release on Wednesday of Consumer Price Index (CPI) data for August. The CPI was expected to have risen 0.6% last month, after a 0.2% rise in July, according to economists polled by Reuters. If realized, that would mean an acceleration in the annual rate to 3.6% from 3.2%.

JOB MARKET

The unemployment rate rose to 3.8% in August, raising hopes among those who don't want to see another rate hike that the U.S. labor market was finally cooling.

But the Reuters poll of economists forecast that the jobless rate would average 3.7% this year and rise only slightly to 4.3% in 2024, suggesting the Fed even then will not be far off its goal of full employment.

House prices and rents were also expected to remain elevated now that a relatively brief U.S. housing market correction appears to be over, according to a separate Reuters poll.

That may put the brakes on further declines in inflation, which is not predicted to reach the Fed's target until at least 2025.

That suggests rate cuts may still be a long way off.

Of the 87 respondents who had forecasts until the middle of 2024, 28 put the timing of the first rate cut in the first quarter and 33 had it in the quarter after that. Only one said the Fed would cut rates this year.

Around 70% of those respondents, 62 of 87, had at least one rate cut by the end of next June. Still, all but five of 28 respondents to an extra question said the bigger risk was that the first Fed cut would come later than they currently forecast.

"Tight labor and housing markets present upside risk to inflation ... That means that absent a recession, policymakers are likely to keep policy rates on hold well into 2024," said Andrew Hollenhorst, chief U.S. economist at Citi.

A serious economic downturn could justify an earlier rate cut, but that is looking less likely. The economy was expected to expand by 2.0% this year and 0.9% in 2024, according to the poll.

The median view from a dwindling sample of economists who provided responses on the probability of a recession within one year fell further to 30%, after tumbling below 50% for the first time in nearly a year last month. It peaked at 65% in October 2022.

"In our base-case forecast, the economy enters recession in the first half of next year, which would have the Fed cutting by Q2. But the risk is that growth holds up and the first cut is pushed out later," Citi's Hollenhorst said.

(For other stories from the Reuters global economic poll:)

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. consumer prices likely increased by the most in 14 months in August amid a surge in the cost of gasoline, but an expected moderate rise in underlying inflation could encourage the Federal Reserve to keep interest rates on hold next Wednesday.

The consumer price report from the Labor Department on Wednesday will be published a week before the Fed's rate decision. It would follow on the heels of data this month showing an easing in labor market conditions in August.

Prices outside the volatile food and energy categories, the so-called core inflation, were likely tame for a third straight month, with the year-on-year increase forecast to have been the smallest in nearly two years.

"It's going to be a mixed picture, with headline inflation picking due to higher gasoline prices and core inflation remaining contained," said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina. "The Fed would be encouraged by the continued moderation trend in core inflation, but it's still too high."

The consumer price index likely increased by 0.6% last month, according to a Reuters survey of economists. That would be the largest gain since June 2022 and would follow two straight monthly advances of 0.2%.

Gasoline prices accelerated in August, peaking at $3.984 per gallon in the third week of the month, according to data from the U.S. Energy Information Administration. That compared to $3.676 per gallon during the same period in July.

Food prices are expected to have continued rising at a moderate pace. In the 12-months through August, the CPI is forecast to have jumped 3.6% after climbing 3.2% in July. While that would mark the second straight month of a pick up in annual inflation, year-on-year consumer prices have come down from a peak of 9.1% in June 2022. The Fed has a 2% inflation target.

The core CPI, excluding food and energy, is forecast to have increased 0.2% for a third straight month amid declining prices for used cars and trucks. Though rents continued to increase, the trend is cooling and a further slowdown is expected as more apartment buildings come on the market.

In the 12 months through August, the core CPI is forecast to have increased by 4.3%. That would be the smallest year-on-year rise since September 2021 and would follow a 4.7% gain in July.

Financial markets overwhelmingly expect the Fed to leave its policy rate unchanged next Wednesday, according to CME Group's (NASDAQ:CME) FedWatch tool. Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

Details on services inflation could, however, leave the door open for a rate hike in November. Airline fares were unlikely to repeat the steep declines recorded in June and July. The cost of hotel and motel rooms likely rebounded amid strong summer demand. That probably kept services inflation, excluding shelter, elevated last month.

Some economists believe inflation risks are tilted to the upside, citing rising insurance costs, especially for motor vehicles. Health insurance costs in the CPI report are expected to rise from October after the Labor Department's Bureau of Labor Statistics, which compiles the report, recently announced changes to its methodology for measuring these costs.

"Under our new forecast for CPI health insurance, we continue to expect core CPI and especially core services ex. housing inflation to accelerate in the coming months but to slow more quickly next spring," said Ronnie Walker, an economist at Goldman Sachs, in a note.

A strike in the automobile sector could disrupt supply chains and boost motor vehicle prices if it lasted more than a month, economists said. United Auto Workers members last month voted overwhelmingly in favor of authorizing a work stoppage at General Motors (NYSE:GM), Ford Motor (NYSE:F) and Stellantis (NYSE:STLA) , if an agreement over wages and pension plans was not reached before the current four-year contract expires on Sept. 14.

"While we all appreciate that the house and renting story is going to be an increasingly important theme that will help suppress core inflation in coming months and quarters, I'm just a little bit nervous because of these factors," said James Knightley, chief international economist at ING in New York.  

(Reporting Lucia Mutikani; editing by Timothy Gardner)

SEOUL (Reuters) - South Korea's financial authorities said they would control household debt by tightening certain loan regulations, as rising mortgage demand drove up household borrowing by the biggest amount in two years in August.

Total household borrowing from banks stood at 1,075.0 trillion won ($810.94 billion) at the end of August, up 6.9 trillion won over the month, central bank data showed on Wednesday.

It exceeded the previous month's 5.9 trillion won increase and the biggest since July 2021, according to the Bank of Korea. Household borrowing has been rising since April.

The country's financial regulator held a meeting on Wednesday with related ministries and agencies to discuss ways to prevent further expansion of household debt, it said in a statement.

The Financial Services Commission said it would introduce measures against misuses of long-term mortgage loans, a stricter debt-to-service ratio for loans on floating rates, and tighter qualification criteria for the government's temporary policy mortgage loan.

In August, mortgage loans grew for a fifth straight month and by 7.0 trillion won, the biggest since February 2020, while other loans fell by 0.1 trillion won in their 21st month of decline.

South Korea's central bank held interest rates steady for a fifth straight meeting in August, as it tries to balance softer inflation with heightened risks to economic growth. Bank of Korea Governor Rhee Chang-yong said rate hikes would remain a secondary option for dealing with rising household debt.

($1 = 1,325.6300 won)

By Leika Kihara

TOKYO (Reuters) -Japan's annual wholesale inflation slowed in August for the eighth straight month, data showed on Wednesday, offering some relief for households and retailers hit by past sharp rises in raw material imports.

The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 3.2% in August from a year earlier, matching a median market forecast.

It slowed from a revised 3.4% rise in July, and is now off a peak 10.6% year-on-year surge hit in December last year, data by the Bank of Japan (BOJ) showed.

"While crude oil prices remain high and yen falls continue, wholesale inflation is slowing ... and could post a year-on-year decline in the fourth quarter," said Toru Suehiro, an economist at Daiwa Securities.

"The price declines seen for some goods can't be ignored" as it could affect households' perception of future price moves, he added.

Rising wholesale prices, driven by last year's surge in global commodity costs and the weak yen, have pushed up Japan's broader consumer inflation by prodding many firms to charge households more for their goods.

While consumer inflation has remained above the BOJ's 2% target for more than a year, the central bank has stressed the need to keep ultra-loose monetary policy until such supply-driven rise in prices is replaced by an increase backed by domestic demand.

By Saeed Azhar and Lananh Nguyen

NEW YORK (Reuters) -Goldman Sachs CEO David Solomon said the U.S. economy is likely to avoid a significant recession, but warned that inflation will likely be more persistent than market participants currently expect.

"The chance of having a relatively soft landing and navigating through this has gone up very meaningfully over the last 12 months," Solomon told Reuters in an interview on Tuesday. "The environment is definitely better."

The Federal Reserve has tamed inflation via interest rate increases, but it may need to take further action, he said.

"I have a personal point of view that inflation is going to be a little bit more sticky than the more optimistic views," Solomon said. "There's still work to do."

The current trajectory of the U.S. Treasuries' forward curve shows rates declining in the future, but Solomon cautioned that might not materialize.

"You have to recognize it's still very uncertain," he said.

Fed funds futures traders largely show the Fed will keep rates on hold until May or June next year, when traders expect the central bank will start cutting rates.

Still, optimism that the U.S. economy will avoid a recession is leading to a reopening of capital markets, Solomon said.

"You’re seeing now this month a bunch of significant IPOs in the market," said Solomon, who noted that Goldman was involved in most of the initial public offerings. "They're meaningful, they're going well," he said.

Arm, the chip designer owned by SoftBank (TYO:9984) Group Corp, is close to raising about $5.4 billion in New York in what might be the biggest IPO of 2023. The IPO will price on Wednesday.

Mergers and acquisitions likely will be slower to resume because uncertainty weighs on companies making strategic decisions.

"People are starting to open up to a better environment and think a little bit more forward strategically, but there's a lag time," Solomon said.

Solomon criticized U.S. proposals that would raise capital requirements for larger banks, echoing comments from his counterparts.

Michael Barr, the Federal Reserve's top regulatory official, told Congress in May that the central bank would unveil its plan to ratchet up capital rules for banks this summer and ensure supervisors more aggressively police lenders following regional bank failures earlier this year that required the government intervention.

"I do think these capital rules will have an impact on economic growth and that will affect large businesses and small businesses and their access to capital," Solomon said. "It'll push some activity out of the banking system if they're implemented."

JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon blasted the proposed rules, telling investors on Monday that they could prompt lenders to pull back and stymie economic growth.

If implemented, the regulations could increase Goldman's capital requirements by slightly more than 25%, Solomon told an investor conference later Tuesday.

The bank will take more writedowns on its commercial real estate portfolio in the third quarter, but amount will be lower than in the second quarter, when CRE weighed on its earnings.

Solomon also spoke about departures of senior bankers, citing historic instances of turmoil when Goldman combined or reshuffled businesses.

"Whenever you put businesses together, there's going to be disruption and there's going to be volatility," he said.

Goldman Sachs has seen several exits since it reorganized into three units last year and scaled back ambitions for its consumer business, which has lost $3 billion in the last three years.

By Andy Bruce and David Milliken

LONDON (Reuters) -Britain's labour market showed more signs of cooling in the three months through July, even as data showing another month of strong pay growth left the Bank of England (BoE) on track for a further interest rate hike next month.

The unemployment rate rose, the number of people in work fell sharply and vacancies dipped below 1 million for the first time in two years, the Office for National Statistics (ONS) said on Tuesday.

It was another record month for pay growth, however - which most investors think will prompt the BoE to raise interest rates again on Sept. 22 to 5.5% from 5.25%, perhaps for the last time in the current cycle.

"The bigger question is about the path thereafter," said Hugh Gimber, global market strategist at J.P. Morgan Asset Management.

"The Bank will be reluctant to keep tightening if they've watched other central banks around the world hit pause. Yet if incoming data doesn't turn definitively, another hike to a terminal rate of 5.75% is absolutely on the table."

Last week BoE Governor Andrew Bailey said the central bank is "much nearer" to ending its run of rate increases but borrowing costs might still have further to rise because of stubborn inflation pressures.

The unemployment rate rose to 4.3% in the three months to July from 4.2% a month earlier, its highest since the three months to the end of September 2021, the ONS said.

The jobless rate is already higher than the 4.1% the BoE had pencilled in for the third quarter as a whole, when it published its last set of forecasts in early August.

Employment dropped by a greater-than-expected 207,000 in the three months to July, the biggest such fall since the three months to October 2020, the data showed.

Wages continued to rise quickly, and above the rate of inflation. Pay packets excluding bonuses were 7.8% higher than a year earlier - the joint-fastest rate since ONS records began in 2001 and in line with economists' forecasts in a Reuters poll.

Including bonuses, pay rose by 8.5% compared with the 8.2% consensus, boosted in part by backdated pay for healthcare workers. Adjusting for consumer price inflation it grew 0.6% - the first positive number since March 2022.

While good news for workers, the level of pay in real terms remains no better than it was more than 15 years ago - a historically dismal record.

"Wage growth remains high, partly reflecting one-off payments to public sector workers, but for real wages to grow sustainably we must stick to our plan to halve inflation," finance minister Jeremy Hunt said.

The pound showed little reaction to the data.