Rate rises might start to happen a bit quicker in Sweden following today’s rate rise. The repo rate rose 25bp to 1.5 per cent to help stabilise inflation and avoid resource utilisation being too high:
Inflationary pressures are still low in Sweden, but are expected to increase as economic activity strengthens… To stabilise inflation close to the target of 2 per cent and to avoid resource utilisation being too high, the repo rate needs to gradually increase. The Executive Board of the Riksbank has therefore decided to raise the repo rate by 0.25 percentage points to 1.5 per cent. The assessment is also that the repo rate needs to be raised somewhat faster in the coming period. Read more
“The Swedish economy is growing at a record rate.” This is the opening sentence of the Riksbank’s announcement that it is continuing its rate raising schedule by hiking rates 25bp. The move was widely expected. Two MPC members entered reservations about the rise and rate path, as with the last rate rise a month ago.
“Underlying inflationary pressures are still low in Sweden,” says the Bank, “but are expected to increase as economic activity strengthens.” Inflation will be pushed temporarily higher by the cost of electricity and commodities but underlying pressures will be low as a result of low labour costs. Read more
Sweden is forecast to raise rates next week by 25bp, taking the repo rate to 1 per cent. If this happens, Sweden will have the honour of being the only European serial rate-raiser – an exclusive club spread across the globe, including Israel, Taiwan and Chile. Other rate-raisers have paused. From Citi:
We expect the Riksbank to continue its policy normalization, hiking by another 25bp to 1.0% at the upcoming October 25-26 meeting. Such a move would echo the September conditional interest rate path and also be in line with current market pricing (discounts about a 92% chance of such an outcome)…
We see compelling reasons building, though, for a downgrade of the longer-term part of the Riksbank’s rate path. There is little sign of inflationary pressures building and, combined with an uncertain global economic outlook and lower global interest rate expectations, the Riksbank should be in no hurry to hike, once the policy rate has reached more normal recessionary levels (of around 1.25-1.5%, in our view).
We already know the Riksbank is planning to raise its key rate from a record low of 0.25 per cent this summer or early autumn, because the Swedish central bank has a policy of forecasting its rate path. But that hasn’t stopped the guessing games in the market as analysts try to decipher whether the move will come at the next meeting on June 30 or at the one after in September.
Bank governor Stefan Ingves wouldn’t give any clues when he spoke to the Financial Times today but his warnings on rising household indebtedness will only fuel expectations of a July hike, following the meeting on June 30. Sweden would become only the second western European country to tighten monetary policy since the financial crisis, after neighbouring Norway.
Low rates have encouraged a surge in mortgage lending that has Read more
What role for central bankers in the future? I have just been speaking to Stefan Ingves, governor of Sweden’s Riksbank, who argues that he and his colleagues may have to be more outspoken in the future in warning about risks to financial stability.
Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS