Swedish central bank increased interest rates


Wednesday, 20 April 2011
The Swedish Riksbank, of the central banks increased the country’s repo rate by 0.25 percentage points to 1.75 percent.

This means that the interest rate path set up in past forecasts remains unchanged. This means that the Riksbank assumes that the policy rate of 2.5 percent will be attained by in the first quarter of 2012.
A year later it will stands at 3.2 percent and 3.6 percent a year later.

Swedish Interest rates development from July 2005 to April 2011
Source: Graffic from Radio Sweden
Two members of the General Executive Board, Karolina Ekholm and Lars EO Svensson, had reservations again against the decision to raise interest rates and decided against the repo.
Riksbank justify the unchanged interest rate path with hopes that wage formation should be taken into consideration.

"An important prerequisite that  the repo rate forecast has not been adjusted up is today’s high CPI inflation which is not significantly more spread out to different actors' long-term inflation expectations and wage formation," the Riksbank.


Riksbank also writes up the growth outlook for this year. The bank now forecasts that GDP will grow by 4.6 percent this year compared with the earlier estimate of 4.4 percent. Next year is rather a small downward revision to 2.3 percent from the previous forecast of 2.4 percent.
The inflation outlook will also change. Consumer price index is expected to increase by 3.2 percent this year and 2.8 percent next year. This is considerably higher than earlier forecast of 2.5 and 2.1 percent.

More analysis to come
By Team

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