STOCKHOLM (Reuters) - Sweden's Centre Party gave its backing for a deal on Saturday that could end months of political deadlock after an inconclusive election and give centre-left Social Democrat leader Stefan Lofven a second term in office.

The agreement, which would force Lofven to shift sharply right in economic policy, includes tax cuts and labour market reform.

It still has to be formally approved by the other parties involved, the Greens - who were in a minority coalition with the Social Democrats from 2014 to 2018 - and the Liberals.

The agreement leaves the anti-immigration Sweden Democrats, who unlike the similarly named Social Democrats have their roots in the white-supremacist fringe, out of power.

"We have chosen our path. We choose a government that will not need support from the Sweden Democrats and that will deliver liberal policies," Centre leader Annie Loof said at the party meeting.

On Sunday, the Liberals will also formally choose between Lofven or whether to back a government headed by centre-right Moderate party leader Ulf Kristersson, head of the centre-right Alliance bloc.

September's election delivered a hung parliament, and the centre-left and centre-right blocs have been at loggerheads on how to form a government without the support of the Sweden Democrats, who appeared to hold the balance of power.

GRAPHIC - Election scenarios:

(Reporting by Johan Sennero; Editing by Kirsten Donovan and Hugh Lawson)

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