* Underlying inflation above target two months in a row
* GDP expected to expand 3.2 pct in 2017
* Riksbank says economy not overheating (Adds details, background, analyst quote)
STOCKHOLM, Sept 21 (Reuters) - The recent uptick in Swedish inflation is fragile and dependent on what other central banks do, meaning it is too early to reverse ultra-loose policy, the central bank agreed at its last rate-setting meeting.
The Riksbank kept benchmark rates unchanged at -0.50 percent and made no adjustment to its bond purchase programme at its Sept. 6-7 meeting, despite price rises being around or above the 2 percent target for most of this year and an economy running in high gear.
Minutes released on Thursday showed no immediate desire to act.
“Inflation and inflation expectations need a more permanent ‘foothold’ than they have at present, and, with the history we have behind us, a rate of inflation above target for a while would not be such a great problem,” the minutes quoted central bank Governor Stefan Ingves saying.
The Riksbank argues its options have been fairly limited as any significant diversion from the European Central Bank’s dovish policy would see the crown appreciate and press down inflation.
Underlying inflation in Sweden came in above the central bank’s 2 percent target for the second straight month in August.
Critics say the Riksbank is building up trouble for the future, especially in the red-hot housing market. The government’s 44 billion Swedish crown ($5.5 billion) budget splurge will further fuel demand.
However, several board member said that there are currently no clear signs of overheating as neither prices nor wages are rising in an unbalanced way.
“There is still some time left before there is seriously a reason to worry about this,” Deputy Governor Per Jansson said.
With the Riksbank nervous about a stronger crown, it is likely to wait for the ECB to take the lead in tightening policy.
A change on the Riksbank board could also spark a rethink, analysts have said. Current chief Stefan Ingves’ mandate expires at the end of the year. The Riksbank General Council could decide on a new governor, or to extend Ingves mandate, as early as Sept. 29.
But for now, it is a matter of no change on policy.
“There are no obvious signs that they are moving towards reacting to the strong development in the Swedish economy,” SEB analyst Elisabet Kopelman said. “In fact, in general it confirms the soft impression from the rate decision.” (Reporting by Johan Ahlander and Daniel Dickson; Editing by Simon Johnson/Jeremy Gaunt)