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Riksbank interest rate hikes 'in doubt': experts

Published: 09 Aug 2011 11:57 GMT+02:00
Updated: 09 Aug 2011 11:57 GMT+02:00

Annika Winsth, chief economist at Nordea, is among those expecting the Riksbank to hold rates at the current level.

"If the mood is the same when they enter the meeting, then we don't believe they will raise rates. At the moment the market is very negative, more or less free-fall," Winsth said.

She added that the development is so dramatic that it is impossible to predict how the situation will be in September and what the Riksbank's decision will be.

Swedbank meanwhile has retained its forecast that the Riksbank will raise interest rates again this year, but recognised that the current market turmoil increases uncertainty over the bank's plans.

"We have an increase in September in our official forecast, but it is clear that there is a downside risk to it in the current situation," said Martin Tallroth, interest rate strategist at Swedbank.

Tallroth added that it is "entirely possible" that the Riksbank would leave rates unchanged for the remainder of 2011.

"Absolutely, it is entirely possible. But our official forecast is for an increase for this year," he said.

Riksbank's interest rate forecast, published on July 5th, indicating a further two rate hikes of 0.25 percentage points each, to 2.5 percent by the end of the year.

The Stockholm stock exchange oscillated wildly on Tuesday in a second day of market turbulence. After initial falls in the OMXS index of as much as -4.3 percent, the market rebounded to around -0.8 percent by lunchtime.

TT/The Local/pvs (news@thelocal.se)

Your comments about this article

13:12 August 9, 2011 by Mib
Raise the interest rate. It's a blip in reaction to indecisive politicians. When they have been shown the way by the market, they will do what is necessary. Germany/EU has to guarantee all debts within the EU......otherwise no-one will have confidence to lend at reasonable rates to the weaker EU members. Their tentative steps to lend some money to Italy ect at reasonable rates has not convinced the market and the fact that they will not guarantee the debts themselves makes the investors question....if it isn't good enough for them, then it's not good enough for us, unless the countries want to pay exhorbitant interest!

So....raise the rates and then if the mayhem continues ie. proven to have made a siginifcant effect on Sweden's growth, then freeze or reduce rates. Sweden is doing well and raising rates will keep the economy at the right balance. People seem convinced that the housing market is in a bubble (I disagree), so another reason to keep a lid on things.
13:55 August 9, 2011 by just a question
It seems the ship is sinking. It's going to sink anyway thanks to this economy made by idiots for selfish idiots who borrow money and pretend they are rich. Even the solutions are idiot: give more public money to the banks that have ruined our economy. The world can't stand more idiots.
14:26 August 9, 2011 by AlexCN4
Idiots...destroy what is good and nice for what? what the hell happened with those politicians, minister etc...they think that will come a miracle and will disappair the crissis...no way, the world already is messed up and will be worse in the next time. The future no sound well.
10:50 August 11, 2011 by Molnboman
No sh*t Sherlock!

The global economy is in freefall and Sweden thinks the garden is rosey!...Wakey Wakey!

Yes, economy is stronger than most.....however, now we have French debts are exposed....who is next?....meatime, Saab will fold soon......Thousands of people will be affected.....who is going to pay for that?

Nevermind.....we are fine....let's raise the interst rate!....Fail!
11:12 August 12, 2011 by rumple123k
Maybe they should concentrate on getting the Kr to its proper value, as it is currently at least 30% overvalued. Which is a serious hamper to exports, perhaps the only sensible way SAAB can go on. Ericsson reporting losses too due to a fall in demand, though I suppose it could be coincidence that the kr used to 14 : 1 against the pound and is now 10:1!!! Seen as there isn't a huge amount of reliance on imports, and in areas where there is a change in the rate of mom's could alleviate the effects, there wouldn't be a substantial hit for the Swedish consumer by the Kr returning to its true value.
10:34 August 15, 2011 by Molnboman
You are right about the strength of the Krona...I too remember when you got 14 Seks to the £ in 2006....mind you the UK economy is in a hell of a state now....and if you were gambling between the two, you tend to run towards the Krona right now and they keep pushing how strong their economy is...with respect to Ericsson....isn't their position more to do with their phones being unfavoured rather than a strong Krona?

SAAB to survive need to have a broader car range including a small Astra / Focus size....but it's a chicken and egg dilemma...unless their flog their overpriced new 95 ranges they won't get the loot to develop smaller cars and thus, there's yer dilemma!.....What about a price reduction on all SAABS to Swedish residents? hahaha Oh no, that would be anti European!
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