Sweden expects interest rates rise to 2 percent


Friday, 01 July 2011
The Swedish central bank, known as the Riksbank is expected to decide on a rate increase of 0.25 percentage points to 2.00 percent next week, according to a survey consensus among 15 analysts carried out by the news agency Reuters.

Analysts such as Martin Enlund, fixed income analyst at Handelsbanken believe that the move that the Riksbank wants to take is right.
“When we sit down and summarize everything that has happened, both financially and statistically, it has mostly evolved roughly in line with the Riksbank's forecasts, and then it takes a lot to determine whether to change that approach now,” he says.


Another analyst, Cecilia Hermansson, chief economist at Swedbank, believes that the Riksbank should be cautious and wait before raising interest rates.

The reason is the economic development of the world which has become somewhat weaker than expected while the Swedish consumption has not increased as much as predicted.

“I think there are more reasons to take a break and see if there is a temporary slowdown in the world and here at home and then take action in September when we’ll have had some more data,”  Hermansson said adding that on of the biggest worry is inflation.
She also thinks however that it is too early to change the forecast for the future repo rate.

“If so this is relatively temporary, it is not unreasonable to continue raising interest rates. Then I think it is reasonable to take a break now and wait to adjust the interest rate path until we have more data.”

Hermansson says that an increase in interest rates next week would not make a dramatic difference. But a higher interest rate may contribute to an unnecessary slowdown in the economy.
By Team

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