Central bank in surprise rate rike
Sweden's central bank, the Riksbank, surprised markets today by raising its main interest rate, the repo rate, by 0.25 percentage points to 4.25 percent.
The Riksbank said in a statement that Sweden's economic outlook and inflation prospects remained largely the same as in December.
"Economic activity in Sweden remains good and the labour market is strong. GDP growth will slow down over the year and the increase in employment will slacken. Resource utilization in the economy will nevertheless be higher than normal," said the Riksbank in a statement.
The move caught analysts and markets off guard, with most having expected rates to remain unchanged.
The krona shot up against both the dollar and the euro on the news, and finanical market professionals were quick to criticize the Riksbank.
"It's very unexpected. I was surprised. There are slow downs in the world economy, Swedish export markets, and wage growth. And despite all this, the Riksbank thinks there is reason to raise interest rates," said Jörgen Appelgren, cheif economist with Nordea.
The bank said that it had taken into account the recent turmoil in the world economy but had come to the same conclusion as in December.
"The repo rate needs to be raised to 4.25 per cent and the assessment is that it will remain at roughly the same level over the coming year. But there is considerable uncertainty in this assessment."
Comments
See Also
The Riksbank said in a statement that Sweden's economic outlook and inflation prospects remained largely the same as in December.
"Economic activity in Sweden remains good and the labour market is strong. GDP growth will slow down over the year and the increase in employment will slacken. Resource utilization in the economy will nevertheless be higher than normal," said the Riksbank in a statement.
The move caught analysts and markets off guard, with most having expected rates to remain unchanged.
The krona shot up against both the dollar and the euro on the news, and finanical market professionals were quick to criticize the Riksbank.
"It's very unexpected. I was surprised. There are slow downs in the world economy, Swedish export markets, and wage growth. And despite all this, the Riksbank thinks there is reason to raise interest rates," said Jörgen Appelgren, cheif economist with Nordea.
The bank said that it had taken into account the recent turmoil in the world economy but had come to the same conclusion as in December.
"The repo rate needs to be raised to 4.25 per cent and the assessment is that it will remain at roughly the same level over the coming year. But there is considerable uncertainty in this assessment."
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.