STOCKHOLM, Feb 1 (Reuters) - Sweden's central bank kept its key interest rate unchanged at 4.00% on Thursday as expected but said that if inflation continued to slow it might be able to bring forward the timing of a first rate cut, possibly even to the first half of 2024.

The pace of inflation has been dropping fast, fuelling expectations that central banks will start to ease policy soon, starting with the U.S. Federal Reserve and with the European Central Bank not far behind.

"The Executive Board now assesses that there is less risk of inflation becoming entrenched at levels that are too high," the central bank said in a statement.

"If the prospects for inflation remain favourable, the possibility of the policy rate being cut during the first half of the year cannot be ruled out."

Economists had expected no change in the policy rate and markets have been expecting a shift in the Riksbank's outlook for some time as a result of lower inflation and a sharp slowdown in the Swedish economy.

"We still think that the Riksbank will cut during the second quarter this year, most probably in June," Lars Kristian Feste, Head of Fixed Income at Ohman Funds said.

The central bank did, however, sound a note of caution, saying that excluding volatile energy prices, inflation remained too high.

Inflation could pick up again, it said pointing to risks of a supply shock resulting from the conflict in the Middle East, corporate pricing behaviour and a substantial weakening of the Swedish currency.

"Monetary policy therefore needs to be adapted cautiously to ensure that inflation is stabilised sustainably close to the target," it said.

The Swedish crown eased against the euro after the rate decision.

The central bank also said it would increase the pace of bond sales from February.

(Reporting by Terje Solsvik, Niklas Pollard, Simon Johnson, editing by Niklas Pollard and Tomasz Janowski)